Ontario – court to consider statutory arbitration as grounds for dismissal of class action – #078

A pair of interim applications in Ronald Breen Consulting v. CNR, 2018 ONSC 1778 disclose an upcoming opportunity for the Ontario Superior Court to determine whether arbitration imposed by federal statute can justify dismissal of court litigation.  In adjudicating applications by Ronald C. Breen Consulting, In Trust (“Plaintiff”) to order Canadian National Railway Company (“CN”) to produce documents and to compel answers on cross-examination, Madam Justice Lynne Leitch noted that CN intended to invoke arbitration provided in Canada Transportation Act. S.C. 1996, c.10 (“CTA”) to obtain dismissal of the litigation filed in court against CN.

The litigation involved a class action concerning fuel surcharges CN collected from rail cargo shipping companies.  Plaintiff commenced its action August 24, 2007 and filed a motion for certification on December 16, 2010.  CN applied for summary judgment in December 2015.  Neither the certification motion nor the summary judgement motion had been heard. CN advised that it would present its summary judgment motion prior to the hearing of Plaintiff’s certification motion.  Doing so obliged CN to accept that the disposition of the summary judgment motion would bind only Plaintiff.

CN had produced two affidavits, both from its Director of Financial Planning: the first, dated March 12, 2015, was in support of CN’s motion for summary judgment; the second, dated November 30, 2017, was in response to a production motion. Cross-examined January 18, 2018 on his second affidavit, CN’s affiant refused to answer questions which Plaintiff claimed were to test the evidence on his affidavit.

The case will be of interest to arbitration practitioners because CN relies on a statutory arbitration scheme as one of its grounds for summary judgment.  CN applied to have the case against it dismissed under Rule 20 and Rule 21 of Ontario’s Rules of Civil Procedure, RRO 1990, Reg 194.  CN claimed that that the CTA is a “complete code”. Its position is that the tariffs issued and published under the CTA are deemed to be “lawful rates”. CN points to section 161 of the CTA which provides that a shipper dissatisfied with a rate charged or proposed to be charged in a public tariff may submit the matter to the Canadian Transportation Agency for arbitration. CN argues that Plaintiff is not entitled to any relief beyond the procedures and remedies set out in the CTA.

Section 161(1) introduces a series of provisions for the resolution of disputes over rates, charged or proposed to be charged:

161 (1) A shipper who is dissatisfied with the rate or rates charged or proposed to be charged by a carrier for the movement of goods, or with any of the conditions associated with the movement of goods, may, if the matter cannot be resolved between the shipper and the carrier, submit the matter in writing to the Agency for a final offer arbitration to be conducted by one arbitrator or, if the shipper and the carrier agree, by a panel of three arbitrators.

Additional sections deal with several aspects of the arbitration including its procedure, confidentiality, fees and the effect of the resulting decision by the arbitrator.  Section 164(4), for example, provides that no reasons shall be set out in the arbitrator’s decision when conducting the final offer arbitration.  Section 164(5) obliges the arbitrator to give reasons if all the parties so request.

The CTA at section 169.31 and following provides for arbitration of a different matter, namely the manner in which a railway company must fulfill its services obligations under section 113 of the CTA.  Again, the section provides guidance on the format and procedure of the arbitration.

In regard to Plaintiff’s two applications, the CTA provisions did serve to limit the scope of discovery.  Leitch J. recorded CN’s arguments resisting more fulsome discovery and noted, in part, how those arguments rested on the CTA’s arbitration provisions:

[52]  CN submits that there is no cause of action to support a claim of “over-recovery” and that the plaintiff’s claims suffer from fatal legal flaws in that they do not disclose a cause of action and are precluded by a statutory scheme, which means that production will be a waste of money, effort, and time. CN submits that the issues on summary judgment are issues of law and can be answered on little to no evidence other than the tariffs themselves. For example, CN submits that it does not matter whether it “over-recovered” if the CTA is a complete legislative code that excludes the remedies sought by the plaintiff or if the plaintiff’s claims are statute-bared.

Leitch J. agreed with CN’s reliance on the CTA arbitration provisions as justification to limit document discovery.

[62]  I agree with CN that the summary judgment motion raises only questions of law: CN will argue that the CTA is a complete code; that the Competition Act is excluded because of the provisions of the CTA; and that in relation to the alleged breach of s. 52(1) of the Competition Act, the language of the tariffs will govern the issue. None of these issues require evidence in relation to an allegation of over-recovery. Put another way, evidence relevant to over-recovery will not assist the plaintiff in responding to these three legal arguments advanced by CN.

The litigation is ongoing.