Citation: Canadian National Railway Company v. Canada (Minister of Transport), 2019 TATCE 5 (Appeal)

TATC File No.: H-4192-41

Sector: Rail

BETWEEN:

Canadian National Railway Company, Appellant

- and -

Minister of Transport (Canada), Respondent

Heard in:	Winnipeg, Manitoba, on June 27, 2018
Before:	George Ron Ashley, Member (chairing)
	Michael Regimbal, Member
	Raymon Kaduck, Member
Rendered:	February 18, 2019

APPEAL DECISION AND REASONS

Held: The appeal is dismissed. The Minister of Transport has proven on a balance of probabilities that the appellant, Canadian National Railway Company, contravened rule 103.1(e) of the Canadian Rail Operating Rules. The monetary penalty of $45,833.04 is upheld.

The total amount of $45,833.04 is payable to the Receiver General for Canada and must be received by the Transportation Appeal Tribunal of Canada within 35 days of service of this decision.

I.  Background

[1]  On December 8, 2015, the Minister of Transport (Minister) issued a Notice of Violation (Notice) to the appellant, Canadian National Railway Company (CN), for an alleged violation. The Notice read as follows:

(a)  On or about September 22, 2015, at the road-railway public grade crossing located at Mile 144.60 on the Rivers Subdivision at Highway 25 in Rivers, Province of Manitoba, Canadian National Railway Company allowed equipment to stand as to cause the unnecessary operation of warning devices, thereby violating Rule 103.1(e) of the Canadian Rail Operating Rules.

[2]  The Notice assessed a monetary penalty in the amount of $45,833.04 for the violation.

[3]  CN requested a review of the Notice by the Transportation Appeal Tribunal of Canada (Tribunal), and a review hearing took place in Winnipeg, Manitoba, on September 21 and 22, 2016. The review member upheld the contravention as well as the amount of the monetary penalty.

[4]  On May 1, 2017, CN filed a request for appeal with the Tribunal, citing several appeal grounds. Those grounds included the following:

1. the Minister failed to prove the alleged violation on a balance of probabilities,
2. the review determination contains errors of fact and law,
3. the Tribunal erred in its interpretation of section 42 of the Railway Safety Act (RSA),
4. the Tribunal erred in its interpretation and application of the due diligence defence,
5. the review determination contained factual errors relating to the railway industry’s involvement in the creation of the Canadian Rail Operating Rules (CRORs), and
6. such further and other grounds as counsel may advise and the Tribunal may allow.

At the appeal hearing, CN also argued that the monetary penalty upheld by the review member ought to be lowered due to the conduct of the railway safety inspectors who observed the violation during the relevant time period. The Minister’s representative noted that this ground was not raised in the May 1, 2017 grounds for appeal. That said, the Minister’s representative provided submissions on this issue and indicated that he would leave it to the Tribunal’s discretion to decide whether to entertain this ground of appeal. The Tribunal notes that CN’s grounds for appeal included “such further and other grounds as counsel may advise and the Tribunal may allow.” In light of this and the fact that the Minister provided submissions on the amount of the monetary penalty, the Tribunal has determined that it is appropriate to consider this ground.

[5]  The basic facts are not disputed, although their interpretation was raised in this appeal relative to the defence of due diligence and the amount of the monetary penalty upheld by the review member. The appellant also raised the question of whether or not a railway company can be held vicariously liable under the RSA for violations that have been committed by its employees acting in the course of their employment.

II.  Statement of facts

[6]  The facts are straightforward and were admitted during the appeal hearing:

1. CN is a federal railway company that was subject to the CRORs during the relevant time period.
2. On September 22, 2015, a Transport Canada railway safety inspector was inspecting a CN crew change in Rivers, Manitoba. There had been at least one occurrence about five weeks earlier of a blocked road-railway crossing at the same location—a public grade crossing on Highway 25. The inspector was there to view the CN operations for that reason.
3. During the viewing, the inspector noticed that the warning devices were activated at mile 144.60 on the CN Rivers Subdivision, signalling CN train operations at or over the road-railway crossing at that location. The activation of the warning devices included the triggering of light units, bells and gates.
4. The inspector observed that there was no train on the crossing and that the warning devices operated for approximately 45 minutes.
5. The warning devices had been activated because a CN crew operating a train (the Rivers train) had left cars on the nearby circuit bond on the track, which activated the warning devices.
6. The cars were left at that location due to another arriving CN train, which had experienced engine failure. To allow the arriving train to continue on to its destination, the CN crew parked the Rivers train in order to extract a functioning engine, which was then added to the arriving train.
7. While this transfer was ongoing, motor vehicles were arriving at the rail crossing over Highway 25. Seeing that there was no train coming or indeed on the crossing itself, some vehicles travelled around the railway gates.
8. The railway inspector contacted CN officials and subsequently, based on the inspector’s recommendation, the Minister issued a Notice of Violation and monetary penalty to CN in the amount of $45,833.04.
9. An earlier occurrence of a highway blockage at that location by CN operations had taken place on August 12, 2015. The Transport Canada railway safety inspector noted that particular occurrence and formally reported it at the time to CN, who responded. No notice of violation was issued for that occurrence.

III.  Analysis

A.  Standard of review

[7]  The appellant referred to a recent Tribunal appeal decision and its appeal to the Federal Court, Canada (Attorney General) v. Friesen, 2017 FC 567, as establishing that on questions of law, specifically the assessment of the due diligence defence, the appropriate standard of review for an appeal panel was one of correctness. This standard, counsel for the appellant argued, also applies to the legal question in this particular appeal of whether or not the RSA creates vicarious liability for violations. The standard of reasonableness applies only to the amount of the monetary penalty.

[8]  Counsel for the Minister agreed with these standards.

Appeal panel finding

[9]  The panel finds that most of the appeal grounds cited will be assessed on the standard of correctness. Accordingly, the panel will conduct its own analysis of the matters at issue. There are two exceptions. One will be the panel’s assessment of the amount of any monetary penalty, which will be undertaken pursuant to a reasonableness standard. The second, also to be assessed on a reasonableness standard, relates to the review member having found that CN formulated the CRORs, meaning that it cannot now exculpate itself from the application of those rules by shifting responsibility to CN employees.

B.  CN involvement in creating the CRORs

[10]  The review member ruled at paragraph 115 of the determination that “… railway companies are therefore responsible for ensuring that those rules [the CRORs] they have themselves formulated are respected. They cannot simply exculpate themselves by shifting that responsibility onto their employees. Therefore, I do not accept the argument that the company, in this case, is not responsible for the breach of rule 103.1(e)”.

[11]  The appellant argued that this finding is not supported and effectively means that if there is ever a breach of the CRORs then CN will automatically be responsible for the actions of employees. Counsel for the Minister did not address this issue in appeal arguments.

Appeal panel finding

[12]  Subsection 19(1) of the RSA states, in part, that “… the Minister may, by order, require a company (a) to formulate rules respecting any matter referred to in subsection 18(1) or (2.1) …”. Under subsection 19(2), the company is to consult with affected associations or organizations. Under subsection 19(4), the company can be required to file the rules with the Minister, who may approve them as filed, amend them or refuse to approve them. In certain circumstances, the Minister may establish rules pursuant to subsections 19(7) and (9).

[13]  Presently, the Railway Association of Canada coordinates the creation of safety rules among industry participants. There is a delegation of authority for this to happen under section 20.1 of the RSA.

[14]  It is incorrect to conclude that CN itself formulated the relevant rules. The rules were developed by the Railway Association of Canada with railway companies participating and Transport Canada and third parties involved as necessary.

C.  Vicarious liability for violations under the RSA

[15]  The appellant referred to section 42 of the RSA as a clear and deliberate example of the legislative treatment for establishing vicarious liability. It is an explicit provision that creates the presumption that the employer is responsible for the actions of its employees. But it is a rebuttable presumption, meaning that evidence can be presented to refute it. Still, according to the appellant, section 42 applies only to offences under the RSA and not to violations, because there is no comparable language in the RSA or elsewhere dealing with violations.

[16]  In this appeal, the appellant’s argument is that the Minister elected to pursue CN through the administrative monetary penalty/violations process rather than using the offence provisions. Accordingly, the Minister cannot rely on any of the offence provisions (specifically section 42 of the RSA) to invoke vicarious liability against the railway company.

[17]  In support, the appellant referred to the statutory interpretation principle that Parliament does not speak in vain, meaning that if the RSA expressly creates vicarious liability for offences but not for violations, then such liability was not intended for violations. Citing in support a decision of the Supreme Court of Canada, R. v. McIntosh, [1995] 1 S.C.R. 686, the appellant argued that section 42 contains no absurdity or ambiguity that requires interpretation. Rather, it is clear that section 42 applies only to offences and, because this is so clear, there is no need to interpret section 42 as applying to violations as well.

[18]  As a result, counsel for the appellant asserted that the onus to establish vicarious liability against CN was on the Minister, and that the Minister had to show that the company had committed a breach of the CRORs in that it was complicit, reckless, or careless or approved the breach. Counsel for the appellant argued that the Minister was unable to provide any evidence that any of these conditions existed.

[19]  Counsel for the Minister supported the review member’s determination on vicarious liability, claiming that it respected the principles of statutory interpretation. Counsel for the Minister referred to the decision of the Supreme Court in Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, and the direction at paragraph 26, that “… the words of an Act are to be read in their entire context and their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament” (quoting Driedger).

[20]  Counsel for the Minister then referred to the interpretive direction set out in section 12 of the Interpretation Act, which stipulates that, “Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects”. In this light, counsel argued that the ordinary sense of the term “operate”, as it appears in section 17.2 of the RSA, clearly covers railway company operations that are carried out by employees on a daily basis. This interpretation is consistent with the broader context of the RSA, which is clearly and unequivocally in favour of the safety and security of the public and railway personnel. The fact that section 17.1 of the RSA says “No person shall” and section 17.2 says “No railway company shall” further demonstrates that section 17.2 is aimed at the railway company.

Appeal panel finding

[21]  To give the term “operate” as it appears in section 17.2 of the RSA a restricted meaning, as a term that binds only employees and not the company, as advanced by the appellant, would distort the ordinary sense of the word. At least in today’s environment, railway companies still rely on employees to physically operate trains. In terms of operations, they become one and the same.

[22]  A restricted meaning would also run counter to the language of section 17.2, which expressly refers to the need for a “railway company” to comply with the law. While “the operation” of a railway by a railway company or “to operate” one is not defined in the RSA, there is a definition of “operate” in section 87 of the Canada Transportation Act. That legislation deals with the economic regulation of federal railways in Canada and not safety; nevertheless, it is related legislation that applies to railways in Canada. There, to “operate” a railway is broadly defined as including “… any act necessary for the maintenance of the railway or the operation of a train”. CN’s interpretation is unduly narrow when compared to that definition.

[23]  Fundamentally, a narrow meaning for the term “operate” (such as one that exculpates the railway company for operating infractions unless it is shown to be complicit) would be inconsistent with the clearly stated and paramount railway operating safety objectives of the RSA and the CRORs. The narrow interpretation advanced by CN would leave an inordinately large gap in rail safety coverage—one that would effectively absolve the company for safety breaches by employees acting in the ordinary course of their duties—unless it could be shown that CN either directly or indirectly endorsed the breach, in which case the company could be liable.

[24]  CN asserted that the safety objectives of the RSA can still be met under its approach because the Minister can pursue individual company employees for a breach. The panel finds this argument to be unsupportable. It ignores the fundamental objective of the RSA, which is to provide railway operating safety for the protection of the public and railway employees, especially in a post-Lac-Mégantic operating environment. Railway company legal responsibility for operating safety must exist in more than just the limited circumstances when the company is complicit or condones the events.

[25]  For all of the above reasons, the appeal panel sees no reason to disturb the review member’s finding that the RSA conveys vicarious liability to railway companies for violations as well as for offences.

D.  Due diligence

[26]  CN stated that if the appeal panel finds in favour of vicarious liability for RSA violations, then CN must be permitted to demonstrate on a balance of probabilities that it was duly diligent in doing everything reasonable to prevent the violation at issue.

[27]  On this point, CN disagreed with the review member’s finding at paragraph 120 of the determination that “… CN did not demonstrate having taken all reasonable steps through either training or supervision to prevent the violation and the measures taken were clearly insufficient to ensure compliance with the rules …”.

[28]  Citing R. v. Sault Ste. Marie, [1978] 2 S.C.R. 1299 (R. v. Sault Ste. Marie), CN agreed that the legal test is whether or not it “… took all reasonable steps to avoid the particular event”. Clarifying what this means, CN argued that reasonable care exists when there is a good safety system in place and not necessarily a perfect one, when those in charge have done what they are supposed to do, when employer scrutiny exists but is less than the “perfect vision afforded by hindsight”, when there is nothing more the company could have done to avoid the events in question, when monitoring of employee conduct exists but is less than constant, and when violations are the result of employees directly contravening employer policies and procedures. CN also argued that there is no legal duty imposed on an employer to anticipate every possible employee failure and that the consequences of an employee’s breach are relevant to the assessment of the extent of care that the employer must take.

[29]  With these parameters in mind, CN pointed to the evidence before the review member it claimed had been either ignored or not properly considered. CN noted, for example, that CN supervisors had done exactly what they were supposed to do once they became aware of the potential for the problem (by communicating with employees and requiring an audit of compliance); that CN had trained employees on the applicable operating rules; and that the CN Timetable had been amended, with signs posted along the CN tracks. All of these, CN said, had been undertaken prior to September 22, 2015.

[30]  The appellant concluded that its employees were simply guilty of an “error in judgment” in not complying with the specific CRORs provision and in ignoring all of the precautions that CN had provided to them. CN distinguished the incident in this case from the blocking occurrence that had happened five weeks earlier. That one, according to CN, arose out of normal switching. The blockage in this appeal was exceptional, as it involved the setting off of rail cars so that train engines could be transferred.

[31]  Counsel for the Minister cited R. v. Sault Ste. Marie and the defence of due diligence as imposing a heavy burden on the defendant to show that it had taken all reasonable steps to avoid the commission of the matters at issue. Counsel for the Minister submitted that CN failed to do this. First, it did not have a “proper” system in place to avoid the breach, and second, the system it did have in place was not effective.

[32]  Counsel for the Minister argued that the evidence relative to employee training was vague, showing that any training was limited and not well-documented. The Minister also claimed that CN’s precautions were especially inadequate given that the same breach of the CRORs had occurred five weeks earlier at the same location.

Appeal panel finding

[33]  The administrative monetary penalty provisions under the RSA assign railway company liability for safety violations committed by employees who are acting in the ordinary course of their duties while operating the railway. The company can avoid liability by demonstrating that it has taken all reasonable measures to ensure the effective operation of a safety system to prevent the incident from occurring.

[34]  Just because a particular violation occurred does not necessarily mean that any safety system in place was inadequate. Similarly, remedial efforts undertaken after a violation do not necessarily mean that not enough was done in the first place.

[35]  In this case, CN’s evidence consisted of the oral testimony given at the review hearing by CN Manitoba superintendent Tim Pulak. He referred to CN’s overall safety culture, training programs, communication sessions and post-event audits. He also discussed CN’s timetable, which he said was clear, highlighting as it did the need for operating crews to stay off the circuit bond at the Rivers yard. In addition, he testified that there was signage along the rail right of way at the crossing warning crews of the circuit bond location.

[36]  The panel finds that CN’s evidence was general and not particularly detailed. For example, CN referred to communication sessions held with affected operating crews and the rail union in Winnipeg and Melrose, but there was no information on how many sessions there were or how many the CN supervisors attended. There was basically no written record of the sessions, such as minutes or PowerPoint presentations, demonstrating what took place or who participated. There was no evidence of any monitoring or testing by supervisors of crew awareness or conduct at the crossing, and the written directions to employees operating in the area were limited to non-existent. This kind of evidence could have demonstrated that CN took responsibility for operating safety in Rivers by making comprehensive and reasonable steps to avoid any specific breach of rule 103.1(e).

[37]  What is critical in this case is that this was not the first blockage at this location. There was another occurrence five weeks earlier. Even if CN supervisors were not previously aware of the history at this crossing, they certainly became, or ought to have become, aware of it following their receipt on August 14, 2015 of the railway inspector’s Operations Inspection Summary Report (Exhibit M-8 at the review hearing). That report listed two infractions observed at Highway 25 on August 12, 2015 for failing to clear the circuit bond, one for 7 minutes and the other for 10 minutes. CN’s response to that report was minimal. In a response to Transport Canada (completed August 31, 2015; Exhibit M-9 at the review hearing), CN referenced a Division Notice that reinforced procedures to ensure Highway 25 was not unduly blocked.

[38]  CN argued that the causes of the blockages on the two dates were unrelated. The panel finds otherwise. Both arose in the course of normal railway operating procedures: one out of switching and the other out of the transfer of a locomotive from one train to another. Both involved an important operating safety rule. The effect on any crossing motorists and pedestrians was identical.

[39]  CN failed to set up a proper and effective safety system to deal with a safety problem in Rivers that it knew had occurred and, without more robust action, could happen again in the course of normal day-to-day operations. Upon receipt of the Operations Inspection Summary Report, CN ought to have immediately set up a specific training program that educated or re-educated employees on the need for compliance with rule 103.1(e) at that location. There should have been an identifiable record of affected employees who received training, where and when it occurred, and what was covered. There should have been evidence of testing to ensure an understanding of the need for compliance and the consequences of not complying. There should have been a Timetable amendment reinforcing the regulatory need for compliance. Finally, given the road safety implications involved, one would expect some sort of supervisor monitoring of actual operations to see whether the message was being received and followed by the operating crews. CN did not do this. CN’s response was general and imprecise and did not resolve the problem.

[40]  In these circumstances, the panel does not find that CN undertook all reasonable measures to prevent the occurrence of a violation of rule 103.1(e). The review member was correct when he found that CN did not successfully establish a defence of due diligence.

E.  Amount of the administrative monetary penalty

[41]  The review member upheld the amount of the monetary penalty imposed by the Minister. The Minister indicated that $37,500 was the baseline amount for this particular breach. That amount was increased by $14,583 due to the “… harm or potential harm caused by this violation”. The total amount of $52,083 was then reduced by 12 per cent for two mitigating factors to arrive at the penalty amount of $45,833.04. One of the factors the Minister listed as warranting the amount of the penalty was the duration of the blockage. The review member noted this rationale and relied upon it in upholding the penalty amount.

[42]  CN argued that if the duration of the blockage is an aggravating factor, then the railway safety inspector was complicit. CN argued that the railway inspector stood by after discovering the infraction, thereby permitting the blockage to continue for as long as it did.

[43]  Regarding CN’s contention that the railway inspector ought to have mitigated the scope of that harm by communicating earlier with CN, the Minister confirmed that the inspector had checked at the time that there was no impending risk due to new trains arriving over the crossing. The real risk and aggravating factor here, according to the Minister, arose out of the systematic way vehicles were ignoring the crossing protection and going around the gates because there was never any approaching risk.

Appeal panel finding

[44]  There is indeed an obligation for a railway inspector to act sooner rather than later when there is a credible and immediate risk to safety. It would be untoward for a safety inspector to not act to mitigate the potential for such harm, for example by contacting those responsible for immediate correction. Here though, the evidence shows that the inspector had assessed the immediacy and severity of the risk by checking whether new train traffic was anticipated.

[45]  As the evidence presented at the review hearing suggests, the travelling public is prone to driving around railway crossing gates and ignoring signals and alarms when they repeatedly experience no apparent threat to going over a crossing. This conditioning applies to crossings such as the one at issue here. Through repetition, the public learns to assume there are no trains coming and no apparent risk, so they drive around the gates and ignore the warning signals. CN perpetuated this nonchalance at this location by failing to take sufficient corrective action, even when it knew there was a tendency for crews to wrongfully block it.

[46]  In these circumstances, the review member’s determination upholding the penalty amount, including the aggravating factor, was reasonable.

F.  Conclusion

[47]  The panel finds that the RSA assigns vicarious liability for violations to railway companies when the acts or omissions giving rise to an alleged violation result from employees acting in the ordinary course of their duties. The railway company, here CN, may counter allegations using a defence of due diligence. In this case, CN’s due diligence evidence was not sufficient. CN failed to show that it took all reasonable measures to prevent the violation from taking place, especially given that it had been formally warned five weeks earlier that its crews working at this location had made a practice of ignoring rule 103.1(e) of the CRORs.

[48]  The review member’s assessment of a monetary penalty in the amount of $45,833.04 is reasonable. The tendency of the travelling public to normalize illegal crossings by ignoring the warning gates, alarms and lights when they do not see any approaching threat, as here, can have serious if not fatal consequences. The appeal panel agrees that CN’s contribution in this case to that tendency constitutes an aggravating factor.

[49]  The appeal is therefore dismissed.

IV.  DECISION

[50]  The appeal is dismissed. The Minister of Transport has proven on a balance of probabilities that the appellant, Canadian National Railway Company, contravened rule 103.1(e) of the Canadian Rail Operating Rules. The monetary penalty of $45,833.04 is upheld.

[51]  The total amount of $45,833.04 is payable to the Receiver General for Canada and must be received by the Transportation Appeal Tribunal of Canada within 35 days of service of this decision.

February 18, 2019
(Original signed)
Reasons for the appeal decision:		George Ron Ashley, Member (chairing)
Concurred by:		Michael Regimbal, Member Raymon Kaduck, Member
Appearances
For the Minister:	Micheline Sabourin and Eric Villemure
For the Appellant:	Yannick Landry