Chatham-Kent (Municipality) v Canadian Pacific Railway Company, 2025 ONDR 12

ONTARIO

SUPERIOR COURT OF JUSTICE

IN THE COURT OF THE DRAINAGE REFEREE

CITATION: Chatham-Kent (Municipality) v Canadian Pacific Railway Company, 2025 ONDR 12

DATE OF DECISION: 2025-10-30

Court File No.: CV-23-00001165-0000 (Chatham)

B E T W E E N:

THE CORPORATION OF THE MUNICIPALITY OF CHATHAM-KENT

Applicant

• and -

CANADIAN PACIFIC RAILWAY COMPANY

Respondent

• and -

CANADIAN NATIONAL RAILWAY COMPANY, ONTARIO FEDERATION OF AGRICULTURE, and RURAL ONTARIO MUNICIPAL ASSOCIATION

Intervenor Respondents

ACTING DRAINAGE REFEREE

ANDREW C. WRIGHT

HEARD ON MONDAY, TUESDAY and WEDNESDAY, THE 20^th, 21^st and 22^nd DAYS OF OCTOBER, 2025

ORDER

The Court of the Drainage Referee has fixed these days for submissions of the parties with respect to the preliminary constitutional question and supplementary questions set out in the Procedural Orders issued November 22, 2023, the Procedural Order issued September 19, 2024, the Procedural Order issued November 15, 2024 and the Procedural Order issued May 15, 2025; and after hearing the submissions of counsel, for the reasons that follow:

THIS COURT ORDERS that

1. The presiding Referee may vary or add to these rules at any time, either on request or as he sees fit. The presiding Referee may alter this Order by an oral ruling, or by another written Order.

2. This Order is supplementary to the November 22, 2023 Procedural Order, the September 19, 2024 Procedural Order, the November 15, 2024 Procedural Order and the May 15, 2025 Procedural Order, all of which remain in effect, as augmented by this Order, except as specifically amended by this Order, and the reasons for that previous decision remain extant. In the event of a conflict between Orders, the more recent Order shall prevail.

3. Anything that is required by this Order to be delivered by a party to another or to be filed with the Court shall be delivered directly to the presiding Referee concurrently with delivery to the other party or its filing with the Court.

4. For the purposes of this Order and the reasons therefor, unless the context requires a different meaning:

(a) the “Act”, sometimes referred to as the “Drainage Act”, means the Drainage Act, R.S.O. 1990 Chapter D.17, as amended.

(b) the “Authorizing By-law” means the Municipality’s By-law Number 93-2021 given first and second reading and provisionally passed on March 22, 2021 and finally passed on May 31, 2021, adopting the Engineer’s Report and authorizing the completion of the Shaw Branch Drain in accordance with the Act.

(c) the “Constitution Act” means the Canada Act, 1867, being 30 & 31 Victoria, c.3 (UK), as amended,

(d) “CNR” means the Canadian National Railway Company, a “class I rail carrier” for the purposes of the Transportation Act.

(e) “CPR” means the Canadian Pacific Railway Company, a “class I rail carrier” for the purposes of the Transportation Act.

(f) the “Drain” or “Shaw Branch Drain” means the Drainage Act project administered by the Municipality beginning with the Drainage Act process leading up to the completion and adoption of the Engineer’s Report, including rights of appeal to the Drainage Tribunal, then the construction of the Drainage Works and thereafter the maintenance and repair of the Drainage Works, all of the cost of which to be assessed to and paid for by the owners of lands that use the Drainage Works in accordance with the assessment schedules in the Engineer’s Report.

(g) the “Drainage Tribunal” means The Ontario Drainage Tribunal before 1990 when the Ministry of Agriculture, Food and Rural Affairs (OMAFRA) took over the administration of the Drainage Act and “Drainage Tribunal” means the Agriculture, Food and Rural Affairs Appeal Tribunal thereafter.

(h) the “Drainage Works” means the physical infrastructure components of the drainage works to be constructed under the authority of the Drainage Act in accordance with the Engineer’s Report, including a 250mm (10 inch) diameter smooth wall steel pipe under the CPR railway-of-way.

(i) the “Engineer’s Report” means the Engineer’s Report on the Shaw Branch of the Facey East Drain issued by Spriet Associates, dated February 19, 2021, and signed by John M. Spriet, P.Eng., including plan and profile.

(j) the “Municipal Act” means the Municipal Act, 2001, S.O. 2001, Chapter 25, as amended.

(k) the “Municipality” means The Corporation of the Municipality of Chatham-Kent, the applicant, for itself and as the administrator of the Drainage Act within its territorial limits.

(l) “OFA” means the Ontario Federation of Agriculture.

(m) “OMAFA” means the Ontario Ministry of Agriculture, Food and Agri-Business.

(n) the “Railway Safety Act” means the Railway Safety Act, R.S.C., 1985, c. 32 (4th Supp.), as amended.

(o) “ROMA” means the Rural Ontario Municipal Association.

(p) the “Referee Rules” means Regulation 232/15, being the Rules of Practice and Procedure in Proceedings Before The Referee.

(q) the “Sarnia Transportation Agency Decision” means Decision 10-R-2025 issued by the Canadian Transportation Agency on March 12, 2025, under its Case No.: 23-24968 in the matter of an application by Canadian National Railway Company against the City of Sarnia regarding cost apportionment of a utility crossing.

(r) the “Transportation Act” means the Canada Transportation Act, S.C. 1996, c.10, as amended.

(s) the “Transportation Agency” means the Canadian Transportation Agency as continued by subsection 7(1) of the Transportation Act.

(t) the “Transportation Agency Rules” means Canadian Transportation Agency Rules (Dispute Proceedings and Certain Rules Applicable to All Proceedings) (SOR/2014-104).

Parties and Representation

5. The applicant Municipality is represented by Donald F. Bur, a lawyer with the Constitutional Law Institute of Canada, Emily Crawford, a Solicitor in the applicant’s Municipal Solicitor’s office and David Taylor, the Municipality’s Director of Legal Services.

6. The Canadian Pacific Railway Company was initially represented by Kimberley Potter, and Lily MacLeod, lawyers with the law firm of Fasken Martineau DuMoulin ^LLP, Barristers and Solicitors, and since January 10, 2024, is now represented by Christopher DiMatteo, Anne Drost and Andrew Irwin, lawyers with the law firm of Blake, Cassels & Graydon ^LLP, Barristers & Solicitors.

7. The Attorney General of Ontario as intervenor respondent, is represented by Ravi Amarnath and Maia Stevenson, Counsel in the Constitutional Law Branch of the Ministry of the Attorney General of Ontario.

8. The Canadian National Railway Company is represented by Nadia Effendi and Laura M. Wagner, lawyers in the Toronto office of Borden Ladner Gervais ^LLP.

9. The Ontario Federation of Agriculture is represented by Brendan van Niejenhuis and Zachary Rosen, lawyers with Stockwoods ^LLP.

10. The Rural Ontario Municipal Association is represented by Stéphane Emard-Chabot and Asangwa Asongwed, lawyers with Sicotte Guilbault ^LLP.

Answers to Preliminary Issues Questions

11. The answers to the preliminary constitutional question and supplementary questions set out in the Procedural Orders issued September 19, 2024, the November 15, 2024 Procedural Order and the May 15, 2025 Procedural Order are as follows:

(a) Is CPR constitutionally exempt from paying assessments of railway right-of-way land it owns when such assessments have been determined in accordance with and are authorized under the Drainage Act?

Answer: No.

(b) If the answer to question (a) is no, then (i) are the Municipality’s expenses of an application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way to be charged to the Shaw Branch Drain and assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report, and (ii) do those expenses represent an increase in the cost of the Drainage Works caused by the existence of the works of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

Answer: (i) yes; (ii) yes.

(c) If the answer to question (a) is no, then (i) are the costs of any works in addition to the Drainage Works required by the Transportation Agency as a condition of an Order authorizing the construction of the Drainage Works across the CPR right-of-way to be charged to the Shaw Branch Drain and assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report and, (ii) do those expenses represent an increase in the cost of the Drainage Works caused by the existence of the works of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

Answer: (i) yes; (ii) yes.

(d) If the answer to question (a) is no, and the Municipality enters into an agreement with CPR, either of its own volition or as a requirement or condition of an Order authorizing the construction of the Drainage Works across the CPR right-of-way, which agreement requires works in addition to the Drainage Works, (i) are the Municipality’s costs of such additional works to be charged to the Shaw Branch Drain and assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report and, (ii) do those expenses represent an increase in the cost of the Drainage Works caused by the existence of the works of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

Answer: (i) yes; (ii) yes.

(e) If the answer to question (a) is no, then (i) is any payment required to be made by the Municipality as ordered by the Transportation Agency in connection with an application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way or imposed by the Transportation Agency as a condition of the Transportation Agency’s Order authorizing the construction of the Drainage Works across the CPR right-of-way to be charged to the Shaw Branch Drain to be assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report and, (ii) do any such payments represent an increase in the cost of the Drainage Works caused by the existence of the works of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

Answer: (i) yes; (ii) yes.

(f) If the answer to question (a) is no, and the Municipality enters into an agreement with CPR, either of its own volition or as a requirement or condition of an Order authorizing the construction of the Drainage Works across the CPR right-of-way, which agreement requires any payment to be made by the Municipality, (i) is the amount of such payment to be charged to the Shaw Branch Drain and assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report and, (ii) does such payment represent an increase in the cost of the Drainage Works caused by the existence of the works of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

Answer: (i) yes; (ii) yes.

(g) If the answer to question (a) is no, then (i) are the Municipality’s expenses of this application to be charged to the Shaw Branch Drain and assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report and, (ii) do those expenses represent an increase in the cost of the Drainage Works caused by the existence of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

Answer: (i) yes; (ii) no.

(h) If the answer to question (a) is no, then is the Municipality prohibited by sections 106 and 107 of the Municipal Act, 2001 from paying or reimbursing, directly or indirectly, CPR for the amount of any Drainage Act assessments that CPR is required to pay or from exempting CPR from paying such Drainage Act assessments?

Answer: yes

Municipality to Apply to Transportation Agency

12. The Municipality is ordered to make an application to the Transportation Agency for authorization for the Shaw Branch Drain to cross the CPR railway right-of-way as contemplated by the Engineer’s Report. In doing so, the Municipality is not to be taken as acknowledging or attorning to the jurisdiction of the Transportation Agency, nor is it precluded from making submissions that the Transportation Agency does not have the jurisdiction or authority to make such an order.

Future Case Management Conferences

13. The hearing of this application in the Court of the Drainage Referee is adjourned sine die, but the presiding Referee will remain seized

14. The hearing may resume at the request of any party

(a) If it is determined by the Transportation Agency or a court of competent jurisdiction that the Transportation Agency lacks jurisdiction and authority to sanction the crossing by a municipal drain of a railway right-of-way or

(b) if the Transportation Agency refuses to consider the Municipality’s application or fails within a reasonable time to exercise its authority to decide on the Municipality’s application or

(c) if there is some aspect of the Engineer’s Report or the Drainage Act as it applies to the Shaw Branch Drain, which requires interpretation or clarification.

15. If it is necessary for the hearing to resume, the presiding Referee will pick up where the hearing was left with a pre-hearing case management conference to address the following:

(a) Scheduling pre-hearing production and exchange of documents, including affidavits or witness statements for expert witnesses and affidavits or evidence summaries for other witnesses.

(b) Identifying the number and nature of witnesses to be called by each party at a hearing of the merits.

(c) Estimating the amount of time required for the hearing of the merits.

(d) Setting the commencement date for the hearing of the merits.

(e) Making provisions about access to and login credentials for participants in the hearing.

(f) Providing for service by personal service, registered mail or electronically (unless a statute or the Referee requires another method of service).

(g) Dealing with such other matters or things as may arise and which the presiding Referee may determine is expedient to permit.

Video Conference Protocols

16. For case management video conferences and the hearing on the merits to be conducted by video conference, the following provisions shall apply:

(a) The parties shall provide the presiding Referee the names and e-mail addresses of those who will be on hand at the video conference hearing; that includes counsel, any witnesses, and those giving instructions to counsel.

(b) Parties and those with a recognized interest in the proceeding, including news media, will be provided by the presiding Referee with access credentials, including a password, to log into the video conference at the appointed time.

(c) Parties are responsible for arranging to have their witnesses join the Zoom meeting to give their evidence at the time directed by the presiding Referee.

(d) Once logged on, the person will be held in a waiting area pending authorization by the presiding Referee to join the hearing.

(e) Parties intending to call a witness will ensure that the witness has a holy book (Bible or Koran) or an oath-taking article (such as an eagle feather) at hand if they are to be sworn to give evidence; a holy book or other article is not required for a witness who affirms.

(f) Before giving testimony, each witness shall affirm to the presiding Referee orally that they are alone in the room and that they are not relying on any undisclosed document, such as speaking notes. Witnesses are not permitted to testify with others present in the room or to use undisclosed documents without the approval of the presiding Referee.

(g) For those joining the hearing to simply observe without participation, their microphone will be muted and webcams turned off during the hearing conference.

(h) Those joining the hearing will need a device equipped with a webcam and a microphone and access to a reliable internet connection with adequate bandwidth; the device should always be plugged in to ensure that the battery does not run low.

(i) A smartphone may only be used at the discretion of the presiding Referee; the use of a smartphone is discouraged due to potential disruptions, such as incoming calls and messages, and the risk of running out of battery.

(j) Those joining the hearing will normally be alone in their location; if they are not, the presiding Referee may require such other persons to leave the room during the proceeding. There is an ongoing obligation to inform the presiding Referee if they are joined by someone else during the proceeding.

Documents and Exhibits

17. Because case management video conferences and the hearing on the merits are to be conducted by video conference, protocols concerning the entering of exhibits are warranted and the following apply in that connection:

(a) A document, including a plan or photograph, to be relied upon at a hearing must be identified as an exhibit.

(b) To be identified as an exhibit, the document must be provided to the presiding Referee and to all other parties at least 2 days in advance of the video conference hearing at which it is to be presented as an exhibit; the presiding Referee may abridge this time.

(c) The presiding Referee will decide whether to enter the document as an exhibit and, if it is allowed, the presiding Referee will assign an exhibit an alpha/numeric identifier.

(d) Once the document has been entered as an exhibit, the party that introduced the exhibit shall, within 3 business days following the conclusion of the video conference hearing, file an electronic copy of the exhibit with the court via the One-Key portal and, when doing so, shall identify Court File No.: CV-23-00001165-0000 (Chatham) and the exhibit identifier assigned by the presiding Referee; a copy of the e-mail of transmittal shall be provided to the presiding Referee.

(e) Court Orders, the application, notices of motion, facta, case law, legislation and compendiums of authorities will not be marked as exhibits though Court Orders, the application, notices of motion and facta should be filed with the court and item 17(d) above applies mutatis mutandis.

18. At the time of this Order, the following documents are part of the record:

Notice of Application issued July 6, 2023

No.: 1

The Engineer’s Report on the Shaw Branch of the Facey East Drain issued by Spriet Associates, dated February 19, 2021, and signed by John M. Spriet, P.Eng., including plan and profile (the “Engineer’s Report”).

No.: 2

Municipality of Chatham-Kent By-law No.: 93-2021 provisionally adopted on March 22, 2021, and finally passed on May 31, 2021, adopting the Engineer’s Report

Order issued by Acting Referee Andrew Wright on November 22, 2023 providing for the production of documents by the Municipality and the exchange of affidavits by the parties; now reported as Chatham-Kent (Municipality) v Canadian Pacific Railway Company, 2023 ONDR 10.

No. 3

Notice of Constitutional Question issued by CPR on January 31, 2024

No. 4

Affidavit of Alex Miller sworn March 20, 2024, together with two Exhibits, A and B

No. 5

Affidavit of John M. Spriet, P.Eng., sworn March 27, 2024, together with 14 Exhibits, A through M

No. 6

Affidavit of Blaise Chevalier sworn April 2, 2024, together with 36 Exhibits, A through JJ

No. 7

Affidavit of Sid Vander Veen, P.Eng. sworn April 2, 2024, together with five Exhibits, A through E

No. 8

Affidavit of Rheal Lemelin sworn June 27, 2024

No. 9

Affidavit of Jack Carello sworn July 4, 2024, together with 26 Exhibits, A through Z

No. 10

Affidavit of Blaise Chevalier sworn September 6, 2024, together with 7 Exhibits, A through G

Order issued by Acting Referee Andrew Wright on September 19, 2024 providing for the giving of notice to potential intervenor parties; now reported as Chatham-Kent (Municipality) v Canadian Pacific Railway Company, 2024 ONDR 6

Order issued by Acting Referee Andrew Wright on November 15, 2024 adding Intervenor Parties; now reported as Chatham-Kent (Municipality) v Canadian Pacific Railway Company, 2024 ONDR 9

No. 11

Affidavit of Trevor Evans sworn February 21, 2025, together with 5 Exhibits, A through E

No. 12

Application Record of ROMA dated February 21, 2025, including the Affidavit of Lindsay Jones affirmed February 21, 2025 with no Exhibits

No. 13

Affidavit of Jason Bent sworn February 19, 2025, together with 14 Exhibits, A through N

No. 14

Affidavit of Blaise Chevalier sworn March 28, 2025 with no Exhibits

No. 15

Affidavit of Jack Carello affirmed March 28, 2025 with no Exhibits

No. 16

News Release issued April 30, 2025 by Canadian Pacific Kansas City Limited with Interim Consolidated Financial Statements to March 31, 2025.

No. 17

Decision 10-R-2025 of the Canadian Transportation Agency issued March 12, 2025 (Case: 23-24968) in the matter of an Application by the Canadian National Railway Company (CN) against the City of Sarnia (Sarnia) regarding cost apportionment of a utility crossing.

No. 18

Section 2 (Definitions) and sections 211 to 214.1 of the Railway Act [Repealed in 1996], R.S.C. 1985, c. R-3, s. 2.

Order issued by Acting Referee Andrew Wright on May 15, 2025 establishing a date for the hearing of submissions about the preliminary constitutional question and supplementary questions and a schedule for the exchange of Facta in advance of submissions; now reported as Chatham-Kent (Municipality) v Canadian Pacific Railway Company, 2025 ONDR 3 (CanLI)

No. 19

Letter dated October 3, 2025 from counsel for CPR to the presiding Referee and parties providing title documentation and documentation relating to CPR’s corporate status.

19. The documents that have exhibit numbers will retain their exhibit numbers through the case management hearings and hearing(s) on the merits of this case. New exhibits will be identified by the next ensuing exhibit number and be added to the list as the hearing(s) progresses.

20. The documents listed are intended to reflect those things which would normally be filed in court or which would be used in the course of the hearing; it does not include but does not intend to dispense with routine items such as appearances, affidavits of service required by the court staff for filings such as the application, appearances, any motions and routine affidavits of service for supporting affidavits.

21. If counsel or a witness intends to rely upon case law, other than the Act, copies must be provided to the presiding Referee and to all other parties at least 2 days in advance of the video conference hearing at which it is to be referred to; the presiding Referee may abridge this time.

General Matters

22. When any document is required or permitted to be served, it shall be served by personal service, registered mail or electronically (unless a statute or the Referee requires another method of service) and shall be sent to:

(a) the party’s representative, if any;

(b) where the party is an individual and is not represented, to that party directly, where that party has provided an address for service and/or an e-mail address;

(c) where that party is a corporation and is not represented, to the corporation directly, to the attention of an individual with apparent authority to receive the document.

23. For the purposes of this Order, unless otherwise ordered, Andrew C. Wright, Acting Drainage Referee, shall be regarded as the presiding Referee.

24. No adjournments or delays will be granted before or during the hearing except for serious hardship or illness.

25. There will be no costs awarded for proceedings in this application to the date of this Order.

Dated at London, this October 30, 2025.

Andrew C. Wright Acting Drainage Referee

REASONS

1. The Order to which these reasons are attached is part of an evolving case management and procedural Order. It consolidates previously issued Orders, includes currently operable provisions, and eliminates matters that have been completed or are no longer necessary.

2. Words and phrases defined in the Order have the same meaning when used in these reasons. When in these reasons reference is made to the “Order”, it is a reference to the Order to which these reasons are attached.

3. I wish to start by thanking counsel for their assistance. Constitutional law is not standard fare for the court of the Drainage Referee. Counsel for the parties and the intervenors provided instructive background, case law and context. I am grateful.

Synopsis

4. From the evidence provided, it appears that the Engineer’s Report contemplates relatively minor, petition-based Drainage Works that involve lowering and increasing the capacity of an existing drain crossing of CPR railway right-of-way lands. CPR was made aware of the proposed drainage works but elected not to participate in any of the proceedings under the Drainage Act; in particular, CPR exercised none of its appeal rights under the Drainage Act, and the time for doing so has long since passed.

5. CPR relies upon the Constitution Act as the basis of its position that only the Transportation Agency has the authority to authorize the crossing of the railway right of way without CPR’s agreement. CPR has served a Notice of Constitutional Question, which has been entered as Exhibit No.: 3. The Notice of Constitutional Question calls into question the constitutional applicability and operability of numerous sections of the Act and the Authorizing By-law. It does not pose a question, per se, but the submission is that a crossing of the CPR right-of-way by the Drainage Works cannot be authorized by the Drainage Act and that, therefore, any Order of the Court of the Drainage Referee to that effect would be constitutionally invalid.

Intervenors

6. As a result of the Notice of Constitutional Question, the Attorney General for the Province of Ontario has sought and been granted intervenor party status. Resulting from the giving of notice of this application and of the preliminary constitutional question and supplementary preliminary questions in accordance with the procedural Order issued on September 19, 2024, pursuant to the November 15, 2024 Procedural Order, the following have been added as intervenor parties:

Canadian National Railway Company,

Ontario Federation of Agriculture, and

Rural Ontario Municipal Association.

7. It should be mentioned that the notice given pursuant to the procedural Order issued on September 19, 2024 gave the opportunity to observe the proceedings to those who requested observer status. More than a dozen asked for and have been accorded observer status. They have been provided with login credentials and admitted to the Zoom video conference hearings with muted microphones and webcams turned off.

Background and Context

8. In the location at issue, the CPR railway right-of-way is aligned north-east and south-west. It is 99 feet (30 metres) wide. CPR owns the land. In railway terminology, “railway right-of-way” refers to the land within the railway corridor, rather than the legal real estate concept of an easement. The railway terminology is used throughout these reasons.

9. The land surrounding the railway right-of-way lies within the Thames River drainage basin. The Thames River follows a meandering course, generally flowing from northeast to southwest and is located some 3 to 4 kilometres to the south of the CPR railway right-of-way. The upper reaches of the Thames River originate in Perth County, in the area of Stratford; the Thames River outlets into Lake St. Clair in Essex County, southeast of Windsor.

10. Surface water, predominantly from precipitation, that is north of the railway right of way, flows south-southwesterly. It crosses the railway right of way and then flows south southwesterly to the Thames River. Surface water, predominantly from precipitation that falls on the railway right of way and south of it, flows south-southwesterly to the Thames River. These surface waters are accumulated into municipal drains established under the Drainage Act, and thence are carried away and ultimately reach and flow into the Thames River.

11. This lay of the land and the resulting southwesterly flow of water pre-exists municipal drainage under the Drainage Act and the construction of railways in southwestern Ontario.

12. Before the CPR railway was constructed on a raised railbed, water flowed naturally through the area toward and into the Thames River. The raised railbed acts as an artificial barrier to surface water flow from neighbouring lands to the north. In this case, the neighbouring lands to the north include the land owned by Alex and Darlene Miller, who have experienced frequent pooling or ponding of water along the southern limit of their land, resulting in reduced crop yields. The flooding of the Miller property is, at least partially, caused by the CPR raised railbed, which is at a higher elevation than the adjacent Miller lands.

13. The Millers initiated the process under the Drainage Act to secure an improved drainage outlet for subsurface systematic tiling of the Miller lands. There is an existing culvert under the CPR railway right-of-way, referred to by the parties as the Existing Shaw Culvert, but it is not deep enough. The proposed Shaw Branch of the Facey East Drain would be constructed adjacent to but lower than the Existing Shaw Culvert to provide sufficient fall to carry water by gravity from the Miller lands to the East Branch of the Facey Drain.

14. In this location, the East Branch of the Facey Drain flows from northeast to southwest on the south side of the CPR railway right-of-way and carries away water from the railway right-of-way lands and from lands to the north of the railway right-of-way, ultimately to the Thames River. The plan of the proposed Shaw Branch of the Facey East Drain, extracted from the Engineer’s Report, appears on page 48 of these reasons. The plan shows the watershed for the Shaw Branch Drain, the location of the Drainage Works, the course of the East Branch of the Facey Drain flowing from the northeast under the CPR railway right-of-way. This crossing is located east of the Existing Shaw Culvert, as shown on the attached plan. The East Branch of the Facey Drain then flows along the south side of the right-of-way to outlet into the main Facey Drain at a location southwest of the Existing Shaw Culvert. This East Branch of the Facey Drain serves to drain areas in the Thames River watershed both to the north and to the south of the CPR railway right-of-way.

15. The evidence from CPR, and from the intervenor CNR, is that adequate drainage is integral to their operations and of critical importance because a drier substructure is essential for a stable railway track. Because drainage is so critical for safe operations, railway tracks involve drainage systems to intercept flowing water and drain excess water from the soil before it enters the track substructure. Ensuring proper drainage of the rail track structure is important to maintain the stability and integrity of the track structure.

16. Poor drainage can result in serious consequences, such as an elevated risk of derailment. Water saturation weakens slopes and embankments, which can trigger landslides or surficial soil sloughing, leading to possible service interruptions and derailments. Proper drainage is necessary to protect the public, the environment, the railways’ own people and its operations. Indeed, federal track safety regulations require the railways to ensure that the railway track is adequately drained.

17. In this location, because the railway has no direct access to the Thames River, adequate drainage of the railway right-of-way lands depends upon municipal drainage works to enable water to flow away from the railway right-of-way lands and ultimately reach the Thames River.

CPR and CNR in Canada

18. CPR was founded in 1881 and has been integral to the history of this country and to forging a nation from what was previously a collection of colonies. It is an interprovincial and international railway and a federal transportation undertaking. CPR is a Class 1 rail carrier regulated under the Transportation Act and the Railway Safety Act. It operates a 32,000 km railway network across various provinces within Canada, as well as across the United States and Mexico.

19. CPR is a significant national transportation business. In 2023, CPR transported 4.5 million carloads of cargo across 45.7 million miles, including grain, coal, potash and fertilizers, automotive products, lumber, petroleum and consumer products. CPR’s national railway includes the railway right-of-way that is the subject of this case. It is an active railway that passes through Chatham-Kent and is one of the busiest stretches of CPR’s railway, as it is the main connecting route between the Greater Toronto Area and Detroit, Michigan.

20. CNR, like CPR Railways, was built as Canada was being formed. They spanned vast swathes of Canadian territory, connecting the provinces from east to west, and beyond. Both are vital contributors to Canada, both nationally and internationally.

Drainage Act in Ontario

21. The benefits of agricultural land drainage are extensive, including improved crop yields, reduced crop losses due to flooding, less soil compaction, reduced soil erosion and topsoil loss, an extended growing season, and more. But the improved productivity of agricultural land is dependent on municipal drains to provide an outlet for the private drainage systems.

22. The crucial role of adequate drainage of land is generally accepted, as is the need, in many instances, to construct drainage networks under the Drainage Act in order to achieve optimal drainage. Drainage has long been recognized as essential to ensure the productivity of land in Ontario. For over a century, statutory provisions have existed in some form or another to facilitate the construction and funding of drainage projects through municipal governments.

23. The Drainage Act is intended to overcome the common law obstacles to drainage of and thus the productive use of land in the Province. The effect of the common law is to encourage a broken-up, hedgerow-like landscape of border berms, dykes, retaining walls and other barriers to surface water flows designed to protect each individual land holding from surface water coming down from higher land holding(s). The result is no effective drainage of any of the lands in the watershed. The Drainage Act is designed to cut through those barriers and to provide comprehensive, community-initiated and financed drainage systems which serve the needs of all in a watershed and to provide drainage works to facilitate the productive use of all land holdings.

24. The purpose of the Drainage Act is to provide engineered drainage works where needed and when asked for. It is akin to many local improvement legislative schemes in which local landowners may petition for the installation of servicing infrastructure, such as roads, sewers, street lighting and sidewalks. If there is a prerequisite number of petitioners, the municipality proceeds with the project and then recovers the cost of doing so through an assessment of those landowners who use the installation. Usually, the legislation authorizes assessments to be recoverable as municipal property taxes. This is the general scheme of the Drainage Act as it applies to drainage works and it is the local municipality that administers the scheme.

25. The Drainage Act is an extraordinarily powerful instrument. Integral to achieving its purpose, the Drainage Act gives the power to acquire rights over lands for the drainage works and working easements, and to settle the compensation to be paid therefor. It requires the appointment of a drainage engineer to not only devise the drainage works but also to allocate amongst the lands in the watershed, the costs of constructing, maintaining and repairing the drainage works; and it provides the means of collecting the same in like manner as municipal taxes. The Act affords protection from liability for doing all these things under the statutory authority of the Act's provisions. Throughout the Act, there are avenues of appeal afforded to the affected stakeholders. The powers and authority of the Act to install drainage works are awe-inspiring.

26. In that context, it is essential to appreciate that the Municipality brings this application not for itself per se but in a representative capacity as the statutory administrator of the Shaw Branch Drain as proposed by the Engineer’s Report. The municipality is the administrator of the Drainage Act and is not the ultimate payor for the costs of constructing, maintaining, and repairing municipal drainage works; those whose lands use or contribute water to the drainage works pay the costs of constructing, maintaining, and repairing the drains. The Municipality is simply a conduit. Whatever costs are incurred by a local municipality in the Drainage Act processes, including construction, maintenance and repair of drainage works, are passed on to those assessed for the drainage works in accordance with the assessment schedule found in the most recent engineer’s report on the drain. A municipality will only be assessed to the extent that its road or other municipally owned properties are assessed as users of the drain.

27. The establishment of an assessment schedule is a sophisticated exercise. Drainage engineers have developed a multifaceted approach to the exercise. A part of the cost is assessed to the often-numerous parcels of land in the drainage area that contribute water to the drainage works; this is an assessment for outlet liability. A part of the cost is assessed to those lands where the drainage works are carried out for the benefit. Lands that are occupied by drainage works can be awarded allowances by the engineer for the use of the land. This précis is an egregious oversimplification of the skill and judgment required of drainage engineers when establishing an assessment schedule in accordance with protocols that have developed over decades. Each step in the creation of an assessment schedule requires skill and judgment, such as determining how much of the cost should be assessed for outlet liability and selecting runoff coefficients for various types of land uses.

28. All of this assessment work is subject to appeals to the Drainage Tribunal, as is the proposed drainage works project itself.

29. I digress to elaborate upon the role of drainage engineers. When a municipality receives a petition for a municipal drain or a request for the improvement of a municipal drain, as the statutory administrator of the Drainage Act, the municipality is required to appoint an independent drainage engineer in response to the petition or request. The appointed drainage engineer is not a municipal employee. The appointed engineer may be a surveyor registered under the Surveyors Act, but more often the drainage engineer is an engineer registered under the Professional Engineers Act. They hold professional credentials and adhere to professional obligations. In addition, section 11 of the Drainage Act imposes upon the appointed engineer the following statutory obligation:

The engineer shall, to the best of the engineer’s skill, knowledge, judgment and ability, honestly and faithfully, and without fear of, favour to or prejudice against any person, perform the duty assigned to the engineer in connection with any drainage works and make a true report thereon.

30. The appointed drainage engineer is a quasi-judicial statutory office holder with specialized knowledge of drainage problems and solutions, as well as the skill and judgement to establish assessment schedules in accordance with protocols that have developed under the aegis of the Drainage Act over decades of practice and experience.

31. As mentioned, the work of the independent drainage engineer is subject to appeals to the Drainage Tribunal both with respect to any proposed drainage works under section 48 of the Act and also with respect to the assessments under section 54 of the Act. It is therefore appropriate to speak about the Drainage Tribunal. Its members are part-time appointees; they are appointed by Order-in-Council, usually for a renewable three-year term. The Drainage Tribunal hears dozens of appeals each year. The Drainage Tribunal panels hearing those appeals typically consist of three persons: one is a practicing lawyer who often presides, one is a retired, experienced drainage engineer, and a third is a layperson with a background in the municipal world, agribusiness, and/or environmental interests. The Drainage Tribunal is an independent quasi-judicial administrative tribunal that, like the independent drainage engineers, has specialized knowledge of drainage as well as an understanding of assessment practices under the Drainage Act.

The Constitution Act

32. The Constitution of Canada divides legislative power between the federal Parliament and provincial Legislatures. Courts protect this constitutional balance by ensuring that each level of government exercises only those powers assigned to it and does not enact laws that infringe the exclusive jurisdiction of, or impair an exclusive power assigned to, the other level of government.

33. The Constitution Act assigns legislative jurisdiction over interprovincial and international railways to the federal Parliament. The Fathers of Confederation knew that the development of a transcontinental railway was an essential act of nation-building that would be at risk of being stymied if each provincial legislature could impose its own rules to regulate the railway’s construction or operation. Within its sphere of legislative jurisdiction, Parliament has enacted the Transportation Act and the Railway Safety Act.

34. The Province of Ontario has legislative jurisdiction over matters such as municipalities, intra-provincial works and undertakings, and local matters within the Province. The Province has jurisdiction over municipal drains and has exercised that jurisdiction to enact the Ontario Drainage Act. The purpose of the Drainage Act falls squarely within the “local works” as well as “property and civil rights” spheres of Provincial jurisdiction.

35. The Engineer’s Report proposes a municipal drain, a part of which includes the installation of an 11-metre-long drainpipe with a 250-millimetre diameter under the CPR railway right of way. The Municipality’s application is brought pursuant to the Drainage Act for an order that, amongst other things, a water drain be constructed under the CPR railway right-of-way to allow water on private lands adjoining on the north side of the railway right-of-way to other private lands on the south side of the railway right-of-way.

36. Both CPR and CNR take the position that the Court of the Drainage Referee does not have the authority to make such an order under the authority of the Drainage Act on the basis that the Drainage Act is constitutionally inapplicable and inoperative with respect to proposed drainage works within a federally regulated railway right-of-way. The Municipality, the Attorney General for Ontario, the OFA and ROMA take the contrary position. The parties and intervenors have made extensive submissions in support of their respective perspectives.

37. Those submissions may well be valuable at some future time, but, for the present, it is appropriate to recall what was said by this court of the Drainage Referee in the reasons given with the court’s Order issued September 19, 2024, now reported as Chatham-Kent (Municipality) v Canadian Pacific Railway Company, 2024 ONDR 6. The relevant extracts are paragraphs 10 to 15 of the reasons as follows:

38. CPR’s Notice of Constitutional Question calls into question the constitutional applicability and operability of numerous sections of the Act and the Authorizing By-law. It does not pose a question, per se, but the submission is that a crossing of the CPR right-of-way by the Drainage Works cannot be authorized by the Drainage Act and that, therefore, any Order of the Court of the Drainage Referee to that effect would be constitutionally invalid.

39. Whether or not the court of the Drainage Referee has the constitutional authority, the court does not need to, nor does it intend at this time to make an Order to authorize the crossing of the CPR right-of-way by the Drainage Works. I have reviewed the authority of the Transportation Agency as found in sections 100 and 101 of the Transportation Act, the Objectives set out in Section 3 of the Railway Safety Act and Section 16 of the Railway Safety Act. It is not for the court of the Drainage Referee to determine the Transportation Agency’s jurisdiction and authority, but, at first glance, it is conceivable that the Transportation Agency may have the authority to sanction the crossing by a municipal drain of a railway right-of-way. CPR says the Transportation Agency has that authority; the Municipality does not concede that it does. The Attorney General for Ontario shares the Municipality’s reservations about the Transportation Agency’s jurisdiction and authority. This court of the Drainage Referee is not to be taken as giving any opinion on the matter. That said, the Transportation Agency has expertise borne of knowledge and experience with railways and administrative resources that the court of the Drainage Referee does not. The Transportation Agency is in a much-preferred position to ensure that any municipal drain crossing of a railway will not compromise the railway right-of-way or rail traffic using the right-of-way or put at risk the safety and security of the public and personnel, or the protection of property and the environment.

40. Assuming the Transportation Agency has prerequisite jurisdiction and authority, I imagine that, when dealing with applications relating to railways under the Transportation Act, decisions of the Transportation Agency are informed by the Objectives enunciated in Section 3 of the Railway Safety Act, which are all about the safety and security of the public and the protection of property and the environment. Whether or not to approve a utility crossing, and on what terms and conditions, would perhaps focus on the risk of compromising the railway right-of-way and rail traffic using the right-of-way or putting at risk the safety and security of the public and personnel or the protection of property and the environment. It is for the Transportation Agency to determine, but instinctively, CPR's refusal of a municipal drain crossing of one of its railway rights-of-way seems inconsistent with these Objectives and at odds with the public interest.

41. While it is entirely in the discretion of the Transportation Agency to decide how the liability for the expense of the Shaw Branch Drain crossing of the CPR railway right-of-way is to be allocated, under subsection 16(4) of the Railway Safety Act, the Transportation Agency is to consider “the relative benefits that each person who has, or who might have, referred the matter stands to gain from the work, and to any other factor that it considers relevant.” Some portion of the benefit from the municipal drain crossing of the CPR railway right-of-way will accrue to the Drain. Unless the answer is “yes” to the preliminary question set out in clause 9(a) of the Order, whatever portion of the liability for the expenses of the crossing is allocated to the Drain by the Transportation Agency will then be assessed and paid in accordance with the Engineer’s Report as authorized by the Drainage Act. There is no inconsistency or conflict between the federal Transportation Act, the federal Railway Safety Act, and the Ontario Drainage Act.

42. While CPR, in its Notice of Constitutional Question, challenges the authority of the Drainage Act to authorize a crossing of the CPR right-of-way by the Drainage Works and, therefore, challenges the constitutional validity of any Order of the Court of the Drainage Referee to that effect. The Notice of Constitutional Question asserts that the Transportation Agency has the jurisdiction to authorize the crossing of the railway right-of-way without CPR’s agreement, but CPR has carefully avoided putting the essential constitutional question:

Is CPR constitutionally exempt from paying assessments of railway right-of-way land it owns when such assessments have been determined in accordance with and are authorized under the Drainage Act?

15. The answer to this constitutional question is important to the drainage engineering community in Ontario and to municipalities that are charged by the Province with administering and maintaining drainage works under the Act. It is equally important to companies that own and operate federally regulated railways in Ontario and perhaps beyond.

16. Consistent with those statements, paragraph 12 of the Order directs the Municipality to make an application to the Transportation Agency for authorization for the Shaw Branch Drain to cross the CPR railway right-of-way as contemplated by the Engineer’s Report. Paragraph 14(a) of the Order contemplates that the issue of the court’s jurisdiction and authority to authorize and order the crossing by the municipal drain of the railway right-of-way may be brought back to the court of the Drainage Referee if it is determined by the Transportation Agency or a court of competent jurisdiction that the Transportation Agency lacks jurisdiction and authority to sanction the crossing by a municipal drain of a railway right-of-way.

17. I want to be clear about the reason I am giving this direction to the Municipality. It is not because I have decided that I do not have the authority to authorize the municipal drain crossing under the Drainage Act. The Municipality and the Intervenors aligned with the Municipality made very persuasive submissions that the court of the Drainage Referee does have that jurisdiction and authority. I do not express an opinion on the question at this time. If necessary, I will make that decision in due course. Instead, my reason for giving this direction to the Municipality is that, as a practical matter, if the Transportation Agency has the jurisdiction and authority to approve crossings of railway right-of-way lands by a municipal drain, the Transportation Agency has the expertise and experience with railways to approve crossings of various kinds on terms and conditions that focus on mitigating the risk of compromising the railway right-of-way and rail traffic using the right-of-way or putting at risk the safety and security of the public and personnel or the protection of property and the environment. The Transportation Agency is particularly well-positioned to consider the fairness and appropriateness of CPR’s form of Crossing Agreement for a municipal drain. Such a form was not produced in evidence in this case. The Transportation Agency is the expert on railways. If, as I say, the Transportation Agency or a court of competent jurisdiction decides that the Transportation Agency lacks jurisdiction and authority to sanction the crossing by a municipal drain of a railway right-of-way, I will proceed to make the decision when asked.

18. After the final submissions of CPR and CNR on Monday, October 20, 2025, recently retained counsel for the Municipality raised, for the first time, a challenge of the authority of the court of the Drainage Referee to make such an Order directing the Municipality to make an application to the Transportation Agency. The intention of the court has been clearly understood for more than a year, and it is late in the day to be raising a new jurisdictional issue. The Court’s authority is founded on clause 106(1)(f) of the Act.

Context for the Preliminary Constitutional Question

41. The constitutional question that needs to be answered at this time is whether the provisions of the Drainage Act, which authorize the assessment of those who should pay the costs of municipal drainage works, are constitutionally inapplicable and inoperative vis-à-vis federally regulated railways, such as CPR.

42. CPR understands that water coming down on its railway right-of-way from the north or rainfall on the railway right-of-way outlets to and is carried away by the municipal drains in the vicinity. Neither CPR or CNR offer any rationalization for their decision in about 2020 to stop contributing to the cost of municipal drainage established under the Drainage Act, despite their acknowledgment that drainage is critical for safe operations. Railway tracks involve drainage systems to intercept flowing water and drain excess water from the soil before it enters the track substructure. Ensuring proper drainage of the rail track structure is crucial for maintaining the stability and integrity of the track.

43. The only justification offered is that, as federally regulated railways, are constitutionally exempt from contributing to the cost of provincially authorized local municipal drainage works.

44. The evidence is that until sometime in 2020, railways paid assessments under the Drainage Act and had for a century. From that year on, railways have refused to pay Drainage Act assessments and have declined to accommodate municipal drainage projects under the Drainage Act unless the municipality accedes to the railways’ demand that the railway bear none of the cost. The evidence is that many Drainage Act projects have not proceeded or have been deferred.

45. The evidence is that at least six municipalities have sued CPR or CNR for unpaid Drainage Act assessments going back to 2020. The aggregate amount being claimed to the knowledge of the court of the Drainage Referee is in the order of $750,000.00. In all cases, the judicial collection proceedings are being held in abeyance pending the outcome of this proceeding.

46. Many of the affected municipalities are smaller, often rural communities with a limited municipal tax base. It is not just a matter of the railways targeting small municipalities that lack the resources to resist. Stormwater management in larger urbanized communities is typically handled through storm sewers in road allowances, which are financed by the municipality through general municipal taxation and/or development charges. Smaller rural municipalities depend upon the Drainage Act for their stormwater management and rural farm drainage to support their agribusinesses; these municipalities are otherwise hard-pressed to afford to provide the drainage works, much less absorb the cost of maintaining the Drainage Act infrastructure, if railway assessments were to evaporate.

The Preliminary Constitutional Issue

47. CPR submits that the Drainage Act is inapplicable to drainage works in federally regulated railway rights of way under the doctrine of interjurisdictional immunity. The physical structure of the right of way is a matter of core exclusive federal jurisdiction; the Municipality cannot impair the core federal jurisdiction by mandating the construction of new drainage works - physically interfering with – the physical structure of CPR’s right-of-way.

48. CPR also submits that the Drainage Act is inoperative to crossings of federal railway rights-of-way under the doctrine of federal paramountcy. The submission is that, under the federal scheme, the Transportation Agency has the sole authority to resolve any disputes between the railway and the proposing party regarding the construction of a utility crossing or the apportionment of the costs of that crossing. The Drainage Act operationally conflicts with this federal scheme and frustrates its federal purpose of giving a federal decision-maker, being the Transportation Agency, ultimate authority over the construction of utility crossings and the apportionment of costs.

49. CNR supports the submissions of CPR, and both cite jurisprudence extensively.

50. The Municipality, the Attorney General for Ontario, OFA and ROMA join issue. While their submissions are variations on the same theme, the following is representative of their submissions.

(a) With respect to the question of interjurisdictional immunity, it is submitted that the cost assessment provisions of the Drainage Act are constitutionally applicable to CPR. The cost assessment provisions do not impair the core of the federal power over interprovincial railways, and they are therefore constitutionally applicable to CPR. There is no authority to support the assertion that paying a portion of the costs of a municipal drainage work could encroach on the core of the federal power over interprovincial railways or impair a vital aspect of CPR as a railway undertaking. In any event, they say there is no evidence to demonstrate that the cost assessment provisions impair CPR’s operations. The evidence in this case is that CPR’s cost allocation for the Shaw Branch Drain represents a tiny fraction of its first-quarter revenues and expenses.

(b) They submit that the Supreme Court has consistently held that interjurisdictional immunity is to be used in “limited circumstances,” applied “with “restraint” and should “in general be used for situations already covered by precedent.” Interjurisdictional immunity thus should not preclude the application of a provincial drainage law that ensures the orderly drainage of water on impacted properties unless a claimant demonstrates “impairment” of something that is truly “vital and essential” to a federal undertaking. Still less should it be used to resist the allocation of reasonable costs associated with drainage works to the relevant landowners. The point of interjurisdictional immunity is to protect the core of an assigned legislative power, not to immunize federal undertakings from the generally applicable and reasonable costs of doing business or owning land in a province.

(c) With respect to the doctrine of federal paramountcy, the submissions are that there is no conflict between the Drainage Act and the provisions of the federal Transportation Act and Railway Safety Act. The paramountcy doctrine is used to resolve actual conflicts in operation between the provisions of federal and provincial laws, providing that if there is a conflict, the federal law will prevail, rendering the conflicting provincial law inoperative, but only to the extent of the conflict.

(d) In this connection, it is said that the Supreme Court has repeatedly affirmed the importance of “cooperative federalism,” which is a principle that favours a harmonious reading of statutes enacted by the federal and provincial governments. Cooperative federalism permits statutes enacted by both federal and provincial governments to operate concurrently.

(e) Cooperative federalism rests on the presumption that “Parliament intends its laws to co-exist with provincial laws.” Provincial laws of general application regularly apply to works, undertakings, services, things or persons which otherwise fall under federal jurisdiction. Federal undertakings are not immune from provincial laws of general application. Cooperative federalism thus favours, subject to the doctrines of interjurisdictional immunity and paramountcy, the concurrent operation of the Drainage Act with the Transportation Act and the Railway Safety Act. Cooperative federalism requires that the proper approach to determining paramountcy is not to seek conflict between federal and provincial laws, but rather to determine whether the legal schemes can be applied concurrently in a complementary manner. In conducting such analysis, “some interplay, and indeed overlap, between both federal and provincial legislation” is expected. The Municipality, the Attorney General for Ontario, OFA and ROMA say there is no operational conflict, as it is possible to comply with both the Drainage Act and the federal Transportation Act and Railway Safety Act.

51. Again, the Municipality, the Attorney General for Ontario, OFA and ROMA cite jurisprudence extensively.

52. The matter of interjurisdictional immunity is addressed in paragraphs 53 to 89 below. The question of federal paramountcy will be addressed in paragraphs 90 to 144 below.

Doctrine of Interjurisdictional Immunity

53. Before getting to the question of interjurisdictional immunity, it is necessary to determine whether a law is within the enacting legislature’s jurisdiction, courts are first to characterize the law’s “pith and substance”, and second, to decide whether the law’s pith and substance relates to a matter within the enacting legislature’s jurisdiction. If the pith and substance of the law relates to a matter that belongs to the other level of government, the legislation is invalid: Canadian Western Bank v. Alberta 2007 SCC 22, [2007] 2 S.C.R. 3, (“Canadian Western Bank”) at para. 26.

54. In this case, the purpose of the Drainage Act falls squarely within the regulation of “local works” as well as “property and civil rights”, two quintessential areas of provincial jurisdiction. There is no debate about the Drainage Act being valid legislation within Ontario’s exclusive constitutional jurisdiction and authority over municipal institutions in Ontario, local works and undertakings, property and civil rights in Ontario and generally all matters of merely local or private nature in Ontario.

55. Once a statute is found to be a valid enactment by the provincial legislature, in the context of constitutional analysis, that legislation is presumed to apply to federally regulated works and business undertakings. Federally regulated undertakings are not "enclaves immune from provincial laws of general application," and accordingly, interjurisdictional immunity has limited application: Halton (Regional Municipality) v Canadian National Railway Company, 2024 ONCA 174 (“Halton”) at para. 9.

56. Similarly, under the Constitution Act, the Transportation Act and the Railway Safety Act fall within Parliament's legislative authority over railways that extend beyond Ontario's borders.

57. The doctrine of interjurisdictional immunity, in general terms, states that one level of government cannot interfere with the core of a jurisdiction assigned to another. This was established in the Constitution Act, which divided legislative powers between the federal Parliament and the provincial legislatures.

58. Where it operates, interjurisdictional immunity prevents laws validly enacted by one order of government from impairing the “unassailable core” content of a head of power or a vital or essential aspect of an undertaking that is specified as exclusive under the Constitution Act. The two-part test requires that:

(a) the provincial law trenches on the protected “core” of a federal power or undertaking, or vice versa; and

(b) the provincial law impairs the core of the federal power or undertaking or, conversely, the federal law impairs the core of the provincial power.

The doctrine does not invalidate an impairing provision but renders it inapplicable insofar as it affects the vital part of the exclusive head of power that is protected: Halton at para. 44 and para, 50.

59. The Supreme Court has said that interjurisdictional immunity must be applied “with restraint” and “should in general be reserved for situations already covered by precedent”: Bank of Montreal v. Marcotte, 2014 SCC 55, [2014] 2 S.C.R. 725, (“Marcotte”) at para. 63, citing Canadian Western Bank, at para. 66 and para. 77 and Opsis Airport Services Inc v Quebec (Attorney General), 2025 SCC 17 (“Opsis”) at para 38 where the Court said:

The jurisprudence will frequently serve as a “useful guide” in identifying the core of an exclusive head of power (COPA, at para. 36, citing Canadian Western Bank, at para. 77; Marine Services, at para. 55). It was noted in Canadian Western Bank that the application of the doctrine of interjurisdictional immunity should “in general” be reserved for situations already covered by precedent (para. 77). As the Quebec Court of Appeal has rightly observed, the words used by Binnie and LeBel JJ. in that case reflect an intention “to favour the application of the doctrine of interjurisdictional immunity when a precedent exists, without, however necessarily prohibiting it in the other situations” (Attorney General of Quebec v. IMTT-Québec inc., 2019 QCCA 1598, 30 C.E.L.R. (4th) 1, at para. 173).

Do Drainage Act Assessments Trench on

the Protected Core of Federal Railway Jurisdiction?

60. I am not persuaded that Drainage Act assessments trench on the protected core of federal railway jurisdiction. As the Court of Appeal said in Halton, “ordinarily, the absence of an established precedent will present a formidable obstacle to an interjurisdictional immunity claim”: at para. 46.

61. The test is whether the subject comes within the essential jurisdiction — the “basic, minimum and unassailable content” - of the legislative power in question: Desgagnés Transport Inc. v. Wärtsilä Canada Inc., 2019 SCC 58, [2019] 4 S.C.R. 228, at para. 93. The core of a federal power is the authority that is absolutely necessary to enable Parliament “to achieve the purpose for which exclusive legislative jurisdiction was conferred”: Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39, [2010] 2 S.C.R. 536, (“COPA”) at para. 35; Canadian Western Bank, at para. 77.

62. CPR relies heavily upon the Supreme Court of Canada decision in Opsis, so a review of that decision is warranted. Opsis Airport Services provides airport security services at the international airport in Montreal. Opsis’ activities are highly regulated by federal legislation, which imposes numerous requirements on the operator of an international airport. Quebec Maritime Services provides loading operations on transatlantic ships out of a terminal; it, too is highly regulated by federal legislation and regulations. The Quebec Private Security Act (“PSA”) regulates these same activities extensively and provides for the licensing of persons engaged in such activities. The questions before the Court were: should the PSA be declared constitutionally inapplicable to the appellants pursuant to the doctrine of interjurisdictional immunity, and should the PSA be declared constitutionally inoperative in relation to the appellants pursuant to the doctrine of federal paramountcy: Opsis para. 27. In the result, the Court did not deal with the question of federal paramountcy.

63. In Opsis the Court was satisfied that the PSA intrudes on the core of the federal powers over aeronautics (Opsis para. 58) and navigation and shipping (Opsis para. 60), but goes on to say that not every degree of interaction will trigger the application of the doctrine of interjurisdictional immunity: there must be impairment: Opsis para. 40. The Court then looks at the practical potential effects of the impugned provisions of the provincial statute: Opsis paragraph 45. The Court determined that the authority given by the PSA to the license issuer amounted to authority to regulate and apply the rules of aeronautical safety and security. They reached the same conclusions as regards the core of maritime jurisdiction: Opsis paras. 73 and 74. The licensing regime was determined to have the effect of subjecting Opsis’s activities falling within the core of an exclusive power of Parliament to the control of an administrative body created by the provincial legislature. In those circumstances, the Court concluded that there was an impairment of the core of Parliament’s exclusive aeronautics and maritime jurisdiction: Opsis para. 78. The power to suspend, cancel or refuse to renew a licence conferred by the PSA clearly reveals the potential for impairment: Opsis para. 74.

64. CPR argues that the imposition of and requirement to pay Drainage Act assessments falls within the core federal power of railways because it interferes with and potentially interferes with the physical structure of the railway rights-of-way, which is argued to be essential for the operation of railways.

65. This frames the issue too broadly and imputes a regulatory component to Drainage Act assessments. What is at issue is the allocation of the actual cost of local drainage works. There is no regulatory component to the Drainage Act assessments.

66. The assessments are established in a sophisticated way by an independent professional engineer with expertise and experience with drainage under the Drainage Act that has no physical effect on the railway track or regulatory impact on CPR’s railway operation. The assessments are allocated amongst all lands within the drainage area of those drainage works. The Drainage Act is a law of general application, the scheme of which is to provide local drainage solutions. This includes provisions to apportion the cost of construction, maintenance, and repair of the drainage works and to assess those costs against the lands within the drainage area. The costs of construction and ongoing maintenance and repair are levied as municipal taxes upon those properties in the drainage area in accordance with the assessment schedule. It is akin to a local improvement fee, rate or special property tax for the purpose of financing local drainage works.

67. Opsis is concerned with subjecting activities falling within the core of an exclusive power of Parliament to the control of an administrative body created by the provincial legislature. The Drainage Act assessments do not regulate CPR’s operation of its railway or interfere with the physical structure of the railway right-of-way or operation of the railway.

68. The federal railway power is principally concerned with matters essential for the “physical structure of an interprovincial railway”, including the location and operation of railways: Air Canada v. Ontario (Liquor Control Board), 1997 CanLII 361 (SCC), [1997] 2 S.C.R. 581, (“Air Canada v. LCBO”) at para. 72; COPA, at paras. 34 to 37.

69. In Air Canada v. LCBO, the Supreme Court accepted that in some circumstances provision of food and beverages can form a vital or integral part of a federal undertaking: at para. 73. But while the provision of liquor on an airline might well be important for a “competitive edge”, it was not essential to the operation of the aircraft: at para. 74.

70. In COPA, the issue was an aerodrome built by two private citizens on land zoned as agricultural and registered under the federal Aeronautics Act, R.S.C. 1985, c. A-2. The province argued that this violated its law and that the aerodrome should be removed. The Court found that the location of an airport comes within Parliament’s core of exclusive federal jurisdiction, while also noting that some provincial laws will apply to airports because they do not impair an essential part of federal jurisdiction: at para. 38.

71. The provision of drainage may well affect a part of the railway’s undertaking in a beneficial way by carrying away water that would otherwise pose a risk to the rail bed. The scheme of the Drainage Act is to create a regime under which the owners of land within the drainage area of a municipal drain are required to pay their share of the cost of construction, as well as its future maintenance and repair. CPR is attempting to equate the payment of a Drainage Act assessment with railway operation and regulation of the physical railway; however, the assessment for drainage works does not have a regulatory function or physically interfere with the railway. For constitutional purposes, taxing is not the same as regulating.

72. In Air Canada v. British Columbia, 1989 CanLII 95 (SCC), [1989] 1 S.C.R. 1161, the airlines argued that, as federal undertakings, they were not subject to the provincial taxes, arguing a kind of “enclave theory” rendering them immune from otherwise valid provincial legislation. The Supreme Court found this argument to be without merit. The Court held that federal undertakings must operate within a provincial legislative environment, requiring them to pay provincial taxes imposed within the province: at page 1191.

73. I am not persuaded that the assessment provisions of the Drainage Act “trenches” on the core of federal railway jurisdiction. Having failed the first of the two-part test for the invocation of interjurisdictional immunity, it is not necessary to consider the second branch of the test, but I will do so anyway.

Do Drainage Act Assessments Impair the Core of Federal Railway Jurisdiction?

74. Drainage Act assessments do not impair the core of federal railway jurisdiction for two reasons. First, there is no precedent for a finding that a provincial Drainage Act assessment impairs the core of federal railway jurisdiction. Second, the facts of this case do not provide an exceptional rationale for extending the doctrine of interjurisdictional immunity.

75. The level of intrusion on the “core” of power of the other level of government must be enough to trigger the applicability of interjurisdictional immunity. The Supreme Court in Canadian Western Bank defined the standard as “impairing”, which is more severe than “affecting”. It is when the impact of a law moves from “affecting” to “impairing” that “the ‘core’ competence of the other level of government (or the vital or essential part of an undertaking it duly constitutes) is placed in jeopardy, and not before”: at para. 48.

76. In the era of cooperative, flexible federalism, the impact must seriously or significantly trammel the federal power. In other words, “It need not paralyze it, but it must be serious”: COPA, at para. 45.

77. CPR and CNR argue that the Drainage Act assessments impair federal jurisdiction over railways because they prevent Parliament from deciding whether and how to allocate the costs of drainage works which affect railway rights-of-way. They argue that this is central to railway policy.

78. With respect, I disagree. The amount of the assessment for CPR under the Engineer’s Report is $28,599.00, subject to being adjusted to reflect the actual costs incurred. From CPR’s financial reporting to the end of 2023, it had a net income of $1,480 million on revenue of $6,577 million. In the first quarter of 2025, CPR reported net income of $909 million on revenues of $3,795 million. The imposition of a provincial Drainage Act requirement to contribute to the actual cost incurred for local drainage works in the watershed in which the railway right-of-way lands are located does not constitute impairment. CPR has not proffered any evidence demonstrating impairment.

79. CPR and CNR rely on Halton, which is concerned with provincial bylaws that regulate the construction and operation of the physical sites for an intermodal hub being built by CNR. The bylaws provided a broad discretion to refuse permit approval for construction and could result in an overlong approval delay pending official plan amendments. The Court of Appeal upheld the application judge’s finding that the bylaws impaired the core of exclusive federal jurisdiction.

80. This case does not assist the railways, nor does it stand for the proposition that the existence of a provincial tax or local improvement assessment impairs federal jurisdiction. The Halton case dealt with provincial laws regulating the construction or operation of physical sites necessary for federal transportation undertakings. Similarly, in Opsis, the Court determined that provincial laws purporting to regulate the operation of airports and marine terminals impaired the core of exclusive federal jurisdiction. The courts have recognized that these types of facilities are necessary for railways, airports and ports to operate. The construction and running of these facilities are not easily suited to dual regulation.

81. The high threshold cannot be satisfied by simply showing that the subject matter is important to federal undertakings. There must be more to trigger interjurisdictional immunity than just a claim of provincial power. CPR’s argument was rejected in both Marcotte, at para. 68 and Canadian Western Bank.

82. In Marcotte, the Supreme Court found that the “[p]rovincial regulation of mortgages, securities and contracts can all be said to relate to lending in some general sense and will at times have a significant impact on banks’ operations.” Relying on Canadian Western Bank, the Court found this was not enough to trigger interjurisdictional immunity.

83. In Bank of Toronto v. Lambe, (1887) L.R. 12 App. Cas. 575 (PC), the Privy Council confirmed that provincial taxes may apply to federally regulated undertakings to the extent they are not a disguised attempt to regulate the undertaking or tax it out of existence. The argument that a provincial tax should be constitutionally inapplicable to a federally regulated bank because of the mere possibility that the tax could be used to “crush a bank out of existence” was rejected: at page 586.

84. The imposition of a provincial tax or municipal property taxes or a local improvement levy on a federal undertaking does not constitute impairment. This case does not involve the ability of the province to prevent or delay a federal undertaking. It is, in effect, a property tax-like assessment to cover the actual cost of local drainage works serving a drainage watershed in which the railway right-of-way lands are located. There must be something more. CPR has not provided any precedent for the doctrine’s application to Drainage Act assessments.

85. I am not satisfied, on the facts of this case, that there is an “exceptional rationale” to expand the doctrine of interjurisdictional immunity: Canada Post Corporation v. Hamilton (City), 2016 ONCA 767, 134 O.R. (3d) 502, at para. 96.

86. Railways are not immune to paying Drainage Act assessments because they do not impair the core of federal railways.

87. I wish to say a word about the case of Air Canada v. Ontario (Finance), (2025) 177 O.R. 60; 2025 ONSC 2827. The preceding paragraphs, 53 to 86, dealing with the doctrine of interjurisdictional immunity, bear a striking resemblance to what Justice Penman said in her concise analysis of the subject in her decision in that case. Lest I be faulted for plagiarism, I acknowledge my indebtedness to her for her precise review of the law on the subject. My decision about the doctrine of interjurisdictional immunity is consistent with hers.

88. With respect to municipal drains established under the Drainage Act, which do not physically touch upon a railway right of way, the answer to the preliminary constitutional question is: No, railways are not constitutionally exempt from paying assessments of railway right-of-way land it owns when such assessments have been determined in accordance with and are authorized under the Drainage Act.

89. With respect to municipal drains which are partly on or cross a railway right-of-way, the answer depends upon the doctrine of federal paramountcy.

The Doctrine of Federal Paramountcy

90. The paramountcy doctrine is used to resolve actual conflicts in operation between the provisions of federal and provincial laws, providing that if there is a conflict, the federal law will prevail, rendering the conflicting provincial law inoperative, but only to the extent of the conflict. With respect to paramountcy, cooperative federalism favours the harmonious interpretation of the three statutes at issue, the Drainage Act, the Transportation Act and the Railway Safety Act. Cooperative federalism demands that the proper approach to determining paramountcy is not to seek out conflict between federal and provincial laws but to determine whether the legal schemes can apply concurrently in a complementary manner: Attorney General of Quebec v. IMTT-Québec inc., 2019 QCCA 1598 at para 257; citing 114957 Canada Ltée (Société d’arrosage) v Hudson (Town), 2001 SCC 40 at paras 33 to 39 (per L’Heureux-Dube). Murray‑Hall v. Quebec (Attorney General), 2023 SCC 10 at paras 84 and 85. In conducting such analysis, “some interplay, and indeed overlap, between both federal and provincial legislation” is expected: Saskatchewan (Attorney General) v Lemare Lake Logging Ltd, 2015 SCC 53 at para 22.

91. This is a fair summary. It is extracted from the factum of the Attorney General for Ontario, but it is consistent with the submissions of the parties and intervenors. In its factum, CPR refers to cooperative federalism as flexible federalism. CPR made no reference to cooperative federalism or flexible federalism in their oral submissions.

92. In the context of the doctrine of paramountcy, there are two branches to the question of whether there is a conflict between the provincial Drainage Act and the federal Transportation Act and the Railway Safety Act. A conflict is said to arise in one of two situations, which form the two branches of the paramountcy test: (1) there is an operational conflict because it is impossible to comply with both laws, or (2) although it is possible to comply with both laws, the operation of the provincial law frustrates the purpose of the federal enactment; Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3 SCR 327 (“Moloney”), para 18.

93. Under either branch, the burden of proof rests on the party alleging the conflict. Discharging that burden is not an easy task, and the standard is always high. In keeping with cooperative federalism, the doctrine of paramountcy is applied with caution. It is presumed that Parliament intends its laws to co-exist with provincial laws. Absent a genuine inconsistency, courts will favour an interpretation of federal legislation that allows the concurrent operation of both laws: Moloney, para 27.

94. The railway submission is that with respect to the assessment of the cost of the crossing of a railway right-of-way by a municipal drain under the Drainage Act, there are two schemes. One is the Drainage Act assessment schedules, and the other is through the authority of the Transportation Agency to allocate costs, founded on sections 100 and 101 of the Transportation Act and subsection 16(4) of the Railway Safety Act.

95. The submission is that the two schemes work together. Because the municipal drain crossing of railway right-of-way land is authorized under the federal scheme, the cost allocation of the crossing is determined by that scheme, namely subsection 16(4) of the Railway Safety Act. Under the federal process, either by agreement or by Transportation Agency order, failing agreement, the cost of the crossing would be allocated between the railway and the municipality. Because the crossing is not authorized under the Drainage Act, there are no Drainage Act costs incurred and therefore, nothing for which the railway can be assessed through Drainage Act assessment schedules. The submission is that only the Transportation Agency can allow the municipal drain crossing, so only the Transportation Agency has jurisdiction to allocate the costs of the crossing.

96. The railways say that the cost of the drainage works, net after deduction of the amount, if any, allocated to the railway by the Transportation Agency, would then be charged to the drain and be reallocated by the municipality to the non-railway owners in accordance with the proportions of benefit and outlet liability as determined by the engineer’s report. The point is that, as far as the railway right-of-way land is concerned, the railway’s share is set under the federal regime and must therefore be excluded from any Drainage Act assessment schedule.

97. The submission is that, on this understanding of how things work, there is no conflict between the two schemes for cost allocation. The way to amalgamate these schemes together is to acknowledge that interjurisdictional immunity requires that the construction of the crossing and that the assessment of costs against the railway, as the federal undertaking, must be determined under the federal process. And then, whatever costs are allocated to the municipality by the Transportation Agency can be reallocated downstream, but not against the railway, because that would conflict with the paramount order of the Transportation Agency under federal law.

98. The question, then, is: Is there a conflict between the federal and provincial cost schemes such that an apportionment Order by the Transportation Agency under subsection 16(4) of the Railway Safety Act, or the potential for one, operates to preclude a railway from being assessed under the Drainage Act?

99. When considering the question, it is essential not to conflate the Municipality, per se, with the Municipality as the statutory representative and agent for the Shaw Branch Drain, being the stakeholders or landowners in the drainage area of the drain.

100. The Municipality, per se, has no interest in the Shaw Branch Drain, as it owns no land in the drainage area and does not appear on the assessment schedules. Its role in this application is as the administrator of the Drainage Act. It is a statutory requirement.

101. When the Municipality make an application to the Transportation Agency for authorization to approve the crossing of CPR’s railway right-of-way lands by the Shaw Branch municipal drain, it will do so in its capacity as the statutory representative and agent for the Shaw Branch Drain.

102. The Transportation Agency has the jurisdiction and authority, under subsection 16(4) of the Railway Safety Act, to consider “the relative benefits that each person who has, or who might have, referred the matter stands to gain from the work, and to any other factor that it considers relevant” and “determine the proportion of the liability for construction, alteration, operational and maintenance costs to be borne by each person, and that liability shall be apportioned accordingly.”

103. The Transportation Agency’s jurisdiction and authority under subsection 16(4) of the Railway Safety Act is limited in its scope to costs connected to the location where the railway right-of-way meets the municipal drain; in effect, the costs associated with installing an 11-metre-long drainpipe with a 250-millimetre diameter under the CPR railway right-of-way. But in the case of a municipal drain, the pipe under the railway right-of-way is not just a pipe in the ground. It is part of a municipal drain authorized under the Drainage Act, and as such, it comes with rights and obligations for the lands upstream of the pipe and rights and obligations for lands downstream from the pipe, none of which are owned by the Municipality. Many of the obligations are in the assessment schedules attached to the Engineer’s Report.

104. Under the Drainage Act, an assessment schedule is a zero-sum exercise. It starts with the amount of money required for the drainage works through assessment levies. That global amount does not change. Altering the assessment of any one property in the watershed necessarily requires changes to some or all of the other assessments in the watershed to raise the same global amount needed to fund the drainage works. It is the routine practice of Courts of Revision and the Drainage Tribunal, when changing an assessment in response to an appeal, to reallocate the changed amount to some or all of the other properties identified in the assessment schedule, ensuring that the total global amount required remains the same.

105. Subsection 16(4) of the Railway Safety Act does not authorize the Transportation Agency to recast a Drainage Act assessment schedule for the entire watershed of a municipal drain. Attempting to do so would risk trenching upon and impairing the protected “core” of the Provincial jurisdiction with respect to “local works” as well as “property and civil rights” as exercised by the enactment of the Drainage Act.

106. The Transportation Agency’s jurisdiction to determine and apportion liability for construction, alteration, operational and maintenance costs is limited to the costs as between the railway and the municipal drain where they overlap. The Transportation Agency can stipulate that some or all of the expenses associated with the intersection of the railway and the municipal drain are to be paid by the municipal drain, and how much by the railway; however, the Transportation Agency’s jurisdiction and authority does not extend to amending the assessment schedule established for the municipal drain under the Drainage Act.

107. When the Municipality makes its an application to the Transportation Agency for authorization for the Shaw Branch Drain to cross the CPR railway right-of-way as contemplated by the Engineer’s Report, for the purposes of subsection 16(4) of the Railway Safety Act, the persons who are parties to the Transportation Agency’s proceedings who stand to gain “relative benefits” from the project are CPR and the Shaw Branch Drain, as represented by the Municipality in its capacity as the statutory administrator of the Drainage Act.

108. In that application process, the first order of business for the Transportation Agency is satisfy itself that any municipal drain crossing of a railway will not compromise the railway right-of-way or rail traffic using the right-of-way or put at risk the safety and security of the public and personnel, or the protection of property and the environment and to impose terms and conditions to ensure that result.

109. Once satisfied, under subsection 16(4) of the Railway Safety Act, it is for the Transportation Agency to consider and decide, but there is a reasonable case to be made that the Shaw Branch Drain should bear the entire cost of the municipal drain crossing; The Engineer’s Report proceeds on that assumption. Whatever portion is allocated by the Transportation Agency to the Shaw Branch Drain is an apportionment to the Municipality, in its capacity as the statutory administrator of the Drainage Act. The amount allocated to the Shaw Branch Drain must then be levied in accordance with the assessment schedule in the Engineer’s Report. Needless to say, before being finalized, those assessment schedules are open to appeals to the Drainage Tribunal by any of the affected landowners, including CPR. It is worth recalling that CPR did not exercise any of its appeal rights under the Drainage Act to challenge that assessment schedule.

110. The Engineer’s Report estimates the cost of the proposed drainage works to be $36,500.00, which includes HST, survey, the preparation of the Engineer’s Report, with plan and profile, and supervision of the drainage work construction and final inspection after completion. The assessment schedule for construction is as follows:

CON.

LOT

HECTARES AFFECTED

ROLL NO. (OWNER)

BENEFIT

OUTLET

TOTAL

SHAW BRANCH

3

Pt.3 &4

1-092-01 (Huston Farms Inc.)

$300.00

$300.00

3

Pt.3 &4

9.30

1-093 (A.&D. Miller)

$2,870.00

$4,731.00

$7,601.00

R.O.W

1.0

3-264 (CPR)

$5,860.00

$2,629.00

$8,489.00

TOTAL ASSESSMENT ON LANDS

$9,030.00

$7,360.00

$16,390.00

SPECIAL ASSESSMENT against Canadian Pacific Railway for increased cost of a 16m – 250 mm dia. Smooth wall steel pipe under their railway

$20,110.00

TOTAL ASSESSMENT ON SHAW DRAIN

$36.500.00

111. There is a separate and different assessment schedule for future maintenance and repair.

112. The benefits of the Shaw Branch Drain to CPR are enumerated by the Engineer in his affidavit, sworn March 27, 2024, as

CP's lands are within the Facey Drain catchment area and contribute water to the system. In this location, CP does not currently have a direction connection to the Facey drain. With the construction of the Shaw branch, they will have a direct connection which will provide CP with better control of surface water. CP will also obtain improved drainage on the north side of the tracks with a deeper outlet. All of these outcomes are considered benefit under the Drainage Act.

113. In that affidavit, the Engineer also speaks of the acre of CPR land which runs off directly into the Shaw Branch Drain and the outlet liability therefor.

114. The $20,110.00 special assessment against CPR is explained in the Engineer’s Report as follows:

Special Assessment

In accordance with Section 26 of the Drainage Act, a Special Assessment has been made against CP Railway Inc. being the increased cost to the drainage work for boring a 250mm diameter smooth wall steel pipe across their right-of-way on the Shaw Branch due to the construction and operation of the rail line. The Special Assessment shall be made up to the actual cost of this work and both the final and estimated values of the Special Assessment are to be calculated as follows:

Drain

Cost of Work

Less Equivalent Drain Cost (Fixed)

Plus Administration Cost

Plus Interest & Net H.S.T.

Special Assessment

250mm pipe

$14,000.00

$1,280.00

$6,900.00

$490.00

$20,110.00

The above special assessments shall not apply for future maintenance purposes.

If any additional work is required to the drainage works due to the existence of buried utilities such as gas pipelines, communications cables, etc. or if any of the utilities require relocation or repair, then, the extra costs incurred shall be borne by the utility involved in accordance with the provisions of Section 26 of the Drainage Act.

115. This brings into focus CPR’s essential substantive issue, which is that CPR is dissatisfied with section 26 of the Drainage Act. That section is as follows:

26 In addition to all other sums lawfully assessed against the property of a public utility or road authority under this Act, and despite the fact that the public utility or road authority is not otherwise assessable under this Act, the public utility or road authority shall be assessed for and shall pay all the increase of cost of such drainage works caused by the existence of the works of the public utility or road authority.

116. Public Utility is defined in the Act to mean: “a person having jurisdiction over any water works, gas works, electric heat, light and power works, telegraph and telephone lines, railways however operated, street railways and works for the transmission of gas, oil, water or electrical power or energy, or any similar works supplying the general public with necessaries or conveniences.”

117. The purpose of section 26 of the Drainage Act is to assess the cost of drainage works as if the public utility were not in existence and then to assess the public utility for the increased cost of the drainage works caused by the existence of the public works. In the case of the Shaw Branch Drain, if the railway right-of-way were not present, the Shaw Branch Drain would be connected to the Facey East Drain by an open ditch. The estimated cost of such an open ditch has been estimated by the Engineer to be $1,280.00. The $20,110.00 special assessment to CPR represents the additional cost of installing an 11-metre-long, 250-millimetre-diameter drain pipe under the CPR railway right-of-way, rather than an open ditch. It is to be noted that under section 69 of the Drainage Act, CPR has the option of installing the drain pipe itself.

118. Section 26 is mandatory. The Engineer’s discretion and judgement are limited to his estimate of the cost of the drainage works if the railway were not in existence in the location. It is only the amount in excess of that cost that is assessed to the railway.

119. Needless to say, the actual amount of the assessments to be paid under the Engineer’s Report will depend upon the actual cost of the Drainage Works, which will inevitably be different than the Engineer’s estimates. However, the actual assessments will be levied in the same proportion as those appearing in the Engineer’s assessment schedule. In the same vein, if the Transportation Agency orders that some part of the costs is to be borne by CPR, the amount to be assessed under the Drainage Act will be the amount ordered by the Transportation Agency to be borne by the Shaw Branch Drain in the same proportion as in the assessment schedule, net after any CPR payment ordered by the Transportation Agency.

120. The Engineer’s Report was not challenged in appeal processes under the Drainage Act, nor was the Engineer’s evidence challenged in this proceeding.

Is There A Conflict?

121. Moloney indicates that the question of whether the concurrent operation of the Drainage Act and the federal Transportation Act or the Railway Safety Act results in a conflict requires analyzing the legislative schemes at issue to reach a proper understanding of the provisions allegedly in conflict: para. 31.

122. The purpose of the federal Transportation Act and the Railway Safety Act is enunciated in the Objectives listed in Section 3 of the Railway Safety Act, which are all about the safety and security of the public and the protection of property and the environment. The cost to the railway of achieving these Objectives is not a pertinent consideration.

123. Subsection 16(4) of the Railway Safety Act has general application to any work that touches upon a railway, including such things as roads, natural gas and oil transmission and distribution pipelines, telephone and hydroelectric wires. It does not explicitly refer to, much less express an intention to supersede municipal drains authorized under the Drainage Act or its counterparts in other provinces; there is no such reference in the federal Transportation Act or the Railway Safety Act, at least none was brought to the court’s attention.

124. The federal scheme and the mandate of the Transportation Agency regarding railways, railway rights-of-way, and rail traffic using those rights-of-way are to ensure the safety and security of the public and railway personnel, as well as the protection of property and the environment. This is their area of expertise and the core of their railway mandate. The authority under subsection 16(4) of the Railway Safety Act is incidental to the core mandate and is narrowly focused on the actual railway work, namely the municipal drain pipe crossing of CPR’s railway right-of-way. The authority does not extend beyond the railway right-of-way.

125. The purpose of the Provincial Drainage Act is summarized in paragraphs 23, 24 and 25 above. In essence, it is to supplant the common law obstacles to drainage with a scheme to provide engineered drainage works on a watershed basis, integral to which are: professional engineering; acquisition of occupation rights to use necessary land; allocation and collection of the cost of the drainage works to watershed lands; and the administration of the statutory scheme by the local municipality with the protection of the statutory authority of the Act.

126. In the provincial scheme, the municipal drain crossing the CPR railway right-of-way is part of a larger drainage system. As stated in paragraph 103 above, the pipe beneath the railway right-of-way is not just a pipe in the ground. It is part of a municipal drain authorized under the Drainage Act, and as such, it carries benefits, rights, and obligations for the lands upstream of the pipe, as well as benefits, rights, and obligations for the lands downstream.

127. When Parliament enacted the Transportation Act and the Railway Safety Act in 1996, Parliament was aware of the Drainage Act. It is to be presumed that Parliament intends its laws to co-exist with provincial laws concurrently and in a complementary manner: Reference re Pan‑Canadian Securities Regulation, 2018 SCC 48, [2018] 3 SCR 189, para. 17.

128. The Transportation Agency has no authority beyond the limits of the railway right of way. As said in paragraphs 104, 105 and 106 above, under the Drainage Act, an assessment schedule is a zero-sum exercise. It starts with the amount of money required for the drainage works through assessment levies. That global amount does not change. Altering the cost-sharing of any one property in the watershed necessarily requires changes to some or all of the other assessments in the watershed to raise the same global amount needed to fund the drainage works. Subsection 16(4) of the Railway Safety Act does not authorize the Transportation Agency to recast a Drainage Act assessment schedule for the entire watershed of a municipal drain. The Transportation Agency’s jurisdiction to determine and apportion liability for construction, alteration, operational and maintenance costs is limited to the costs as between the railway and the municipal drain where they overlap. The Transportation Agency can stipulate that some or all of the expenses associated with the intersection of the railway and the municipal drain are to be paid by the municipal drain, and how much by the railway; however, the Transportation Agency’s jurisdiction and authority does not extend to amending the assessment schedule established for the municipal drain under the Drainage Act.

129. The railway’s submission is that, as far as the railway right-of-way land is concerned, the railway’s share is set under the federal regime and must therefore be excluded from any Drainage Act assessment schedule. That indirectly empowers what the Transportation Agency has no authority to do. That result does not arise from an interpretation of federal legislation that allows the concurrent operation of both the federal and the provincial laws. The railways’ interpretation of the federal legislation unnecessarily creates the problem.

130. The railway, in its submissions, says that the cost of drainage works, net after deduction of the amount allocated to the railway by the Transportation Agency, would then be charged to the drain and be reallocated by the Municipality to the non-railway owners in accordance with the proportions of benefit and outlet liability as determined by the engineer’s report. That represents a profound misunderstanding of how the Drainage Act works. The Municipality has no authority to change the Engineer’s report. The portion of the CPR assessment not allocated to the railway by the Transportation Agency would fall into a vacuum, with no one responsible to pay, resulting in a shortfall in the funds required for the drainage works. Again, that result is avoided if an interpretation of federal legislation allows the concurrent operation of both laws. The railway interpretation creates this untenable result and should therefore be rejected.

131. Going back to Moloney, para 27, in keeping with cooperative federalism, the doctrine of paramountcy is applied with caution. It is presumed that Parliament intends its laws to co-exist with provincial laws. Absent a genuine inconsistency, courts will favour an interpretation of federal legislation that allows the concurrent operation of both laws. The burden of proof rests on the party alleging the conflict. Discharging that burden is not an easy task, and the standard is always high. In this case, the railways have not discharged that burden with respect to the operational conflict branch of the paramountcy test.

132. The following is a summary of the second branch of the paramountcy test, as enunciated in Moloney, para 18:

Although it is possible to comply with both laws, does the operation of the provincial law frustrate the purpose of the federal enactment?

133. This second branch requires consideration of the purposes of the federal Transportation Act and the Railway Safety Act. Sections 100 and 101 of the Transportation Act deal with all manner of pipes and wires and road crossings of a railway right-of-way. Subsection 101(4) of the Transportation Act cross-references to section 16 of the Railway Safety Act for apportionment of costs in the absence of an agreement.

134. Subsections 16(1) and 16(4) of the Railway Safety Act are pertinent and they are as follows:

16(1) The proponent of a railway work, and each beneficiary of the work, may refer the apportionment of liability for the construction, alteration, operational or maintenance costs of the work to the Agency for a determination if they cannot agree on the apportionment and if no recourse is available under Part III of the Canada Transportation Act or the Railway Relocation and Crossing Act. The referral may be made either before or after construction or alteration of the work begins.

16(4) Where a matter is referred to the Agency under subsection (1), the Agency shall, having regard to any grant made under section 12 or 13 in respect of that matter, the relative benefits that each person who has, or who might have, referred the matter stands to gain from the work, and to any other factor that it considers relevant, determine the proportion of the liability for construction, alteration, operational and maintenance costs to be borne by each person, and that liability shall be apportioned accordingly.

135. These provisions have a general application and are included as part of the Transportation Agency’s authority to approve a road or utility crossing of a railway right-of-way. When reading the definitions in the Railway Safety Act, it appears that the road crossing or utility crossing is considered the “railway work.” Hence, the road authority, telephone company, or gas distribution company is the proponent under subsection 16(1) of the Railway Safety Act. Implicit in section 16 of the Railway Safety Act is that the cost apportionment dispute is between the proponent of the railway works and the railway company operating the railway where the road crossing or utility crossing is to occur.

136. The purpose of section 16 of the Railway Safety Act is to resolve disputes between the proponent of the “railway works”, i.e. the road authority, telephone company, or gas distribution company, and the railway company regarding the costs of construction, alteration, or operational and maintenance expenses of the railway works, i.e. the road, wires, or pipes, depending on the circumstances, at the location of the crossing.

137. When it comes to a crossing of a railway right-of-way by a municipal drain under the Drainage Act, the railways again conflate the Municipality per se with the Municipality as the statutory representative and agent for the Shaw Branch Drain, being the stakeholders or landowners in the drainage area of the drain. Again, the railway’s submission is that, as far as the railway right-of-way land is concerned, the railway’s share is set under the federal regime and must therefore be excluded from any Drainage Act assessment schedule. It is the Municipality's responsibility to determine how to fund the drainage works without further contribution from the railway.

138. The alternative interpretation of the purpose of what the Transportation Agency is to do under subsection 16(4) of the Railway Safety Act is to allocate costs between CPR and the proponent of the “railway works”, being the Shaw Branch Drain, as represented by the Municipality under the Drainage Act. Whatever is apportioned by the Transportation Agency to the Shaw Branch Drain would be assessed in accordance with the Drainage Act, in accordance with the assessment schedules in the Engineer’s Report.

139. For the reasons referred to in paragraphs 128 and 129 above, the railways’ interpretation indirectly empowers the Transportation Agency to do what it has no authority to do. That result does not arise from the alternative interpretation of federal legislation, which allows the concurrent operation of both the federal and the provincial laws. It is the railways’ interpretation of the federal legislation that unnecessarily creates the problem.

140. In the same vein as paragraph 130 above, the railways’ interpretation of the federal legislation unnecessarily risks a shortfall in the funds required for the drainage works. The railway, in its submissions, says that the cost of drainage works, net after deduction of the amount allocated to the railway by the Transportation Agency, would be charged to the drain and be reallocated by the Municipality to the non-railway owners in accordance with the proportions of benefit and outlet liability as determined by the engineer’s report. The Municipality has no authority to change the Engineer’s report. The portion of the CPR assessment not allocated to the railway by the Transportation Agency would fall into a vacuum, with no one responsible to pay, resulting in a shortfall in the funds required for the drainage works. Again, that result is avoided if an interpretation of federal legislation allows the concurrent operation of both laws. The railway interpretation creates this untenable result and should therefore be rejected.

141. Again, going back to Moloney, para 27, in keeping with cooperative federalism, the doctrine of paramountcy is to be applied with caution. It is presumed that Parliament intends its laws to co-exist with provincial laws. Absent a genuine inconsistency, courts will favour an interpretation of federal legislation that allows the concurrent operation of both laws. The burden of proof rests on the party alleging the conflict. Discharging that burden is not an easy task, and the standard is always high. In this case, the railways have not discharged that burden with respect to the second branch of the paramountcy test. Correctly interpreted, the assessment provisions of the Drainage Act do not frustrate the purpose of the federal section 16 of the Railway Safety Act, which is to allocate costs limited to a municipal drain crossing of a railway right-of-way between the municipal drain proponent and the railway company.

142. In the spirit of cooperative federalism and determining how the federal and provincial legal schemes can apply concurrently in a complementary manner, it would be pragmatically preferable for the court of the Drainage Referee not to dabble in the physical technicalities of railway right-of-way crossings. By the same token, when making cost allocation decisions between the railway company and the municipal drain proponent under subsection 16(4) of the Railway Safety Act, the Transportation Agency should make those decisions in the context of the concurrently applicable Drainage Act assessment schedules prepared by those experienced in municipal drainage.

143. The Drainage Act is not rendered inoperative based on the doctrine of federal paramountcy. The doctrine of interjurisdictional immunity does not apply to render the Drainage Act inapplicable to drainage works in federally regulated railway rights-of-way.

144. To the preliminary constitutional question

Is CPR constitutionally exempt from paying assessments of railway right-of-way land it owns when such assessments have been determined in accordance with and are authorized under the Drainage Act?

The answer is: No.

The Sarnia Transportation Agency Decision

145. In support of their respective submissions, the railways made much of the recent Sarnia Transportation Agency Decision. In view of the decision in paragraph 144 above, it is not necessary to review and comment on the Sarnia Transportation Agency Decision, but I will do so anyway because, despite the railways’ submissions to the contrary, it is consistent with the conclusion that the federal and provincial legal schemes can apply concurrently and in complementary ways.

146. When referring to the Sarnia Transportation Agency Decision, the railways incorrectly conflate the City of Sarnia per se, and Sarnia in its capacity as the statutorily obliged administrator of the Drainage Act in connection with the Mandaumin Drain. Under the scheme of the Drainage Act, the Municipality is simply a conduit. Whatever costs are incurred by a local municipality in the Drainage Act processes, including construction, maintenance and repair of drainage works, are passed on to those assessed for the drainage works in accordance with the assessment schedule found in the most recent engineer’s report on the drain.

147. The Mandaumin Drain is a municipal drain established under the Drainage Act or a predecessor of that legislation, under an independent drainage engineer’s report on the Mandaumin Drain, including a plan, profile and assessment schedules for the construction and subsequent maintenance and repair of the Mandaumin Drain. In the Sarnia Transportation Agency Decision, there is no reference to a drainage engineer’s report under the Drainage Act or assessment schedules.

148. The difficulty is that the Sarnia Transportation Agency Decision is short on relevant details. CNR was the applicant in that case, so counsel for CNR, as an intervenor in this case, was able to provide some information. Similarly, because the Attorney General for Ontario intervened in the Sarnia Transportation Agency case, counsel for the Attorney General in this case was able to provide information. Neither counsel was in a position to offer much information, as they had little or no direct involvement in the case before the Transportation Agency.

149. The Sarnia Transportation Agency Decision mentions a watershed or drainage area of approximately 600 hectares. There is no indication of the number of parcels of land in that watershed. Those parcels of land are contributing water to the Mandaumin Drain. That information, though perhaps dated, would have been in the original engineer’s report as part of the assessment schedule. There was no information about the date of the most recent engineer’s report on the Mandaumin Drain, but it would have been well before 2001, perhaps decades before.

150. The Sarnia Transportation Agency Decision describes that an open ditch portion of the Drain ran parallel to CNR rail line within the CNR right-of-way. It would be fascinating to understand how and by what authority or permission a municipal drain was established under the authority of the Drainage Act on federally regulated railway right-of-way land. The original drainage engineer’s report on the Mandaumin Drain might have shed some light on this, but as already stated, there is no mention of any engineer’s report in the Sarnia Transportation Agency Decision.

151. The Sarnia Transportation Agency Decision reports that in 2001, CNR experienced track stability issues and solved the problem by installing two culverts into an open ditch section of the Mandaumin Drain and backfilling to support the track better. There is no reference to a Transportation Agency authorization in 2001 or an engineer’s report under section 78 of the Drainage Act to amend the original engineer’s report on the drain, nor was there any assessment schedule. It may be that CNR altered the Drain without regard for the Drainage Act and with no regard for the engineering underpinning, as reflected in the Mandaumin Drain.

152. The Sarnia Transportation Agency’s Decision states that in 2021, Sarnia determined the CNR culverts were undersized, resulting in flooding upstream. It is understood that Sarnia had been served with a notice pursuant to section 79 of the Act, requiring the City to maintain, repair and restore the Mandaumin Drain to the specifications of the original engineer’s report. That would have exposed the City to liability for damages caused by flooding resulting from the non-repair, and the possibility of an order by the Referee requiring the City to perform its duties, as found in section 74 of the Act.

153. No new engineer’s report would have been required for maintenance and repair because the statutory requirement would have been to restore the drain to the specifications of the drain as found in the most recent engineer’s report. The cost of the repair work would have been levied in accordance with the assessment from that engineer’s report.

154. The Sarnia Transportation Agency Decision reports that Sarnia informed CNR that CNR would be responsible for the entire cost of the project. This is someone’s interpretation of the assessment schedule from the most recent drainage engineer’s report. It is puzzling that none of the cost of the maintenance and repair project was allocated to the lands in the 600-hectare drainage area. This would have been outlet liability. If CNR had challenged the application of the assessment schedule, there was an avenue for doing so under the Drainage Act; most probably an application to the Court of the Drainage Referee.

155. The main puzzle is that restoring the Mandaumin Drain to its original specifications would have involved removing the culverts installed by CNR without authority in 2001 and restoring the open ditch to its original condition. If there were a risk to the railway in 2001 on account of the open ditch, it would continue to be a risk currently. If larger culverts were needed to restore sufficient flows in the Mandaumin Drain consistent with protecting the railway, or if it would be better to relocate the Mandaumin Drain off CNR railway right-of-way land, an engineer should have been appointed under section 78 of the Act to prepare a report with recommendations and assessment schedules. The City had no obligation to commence a section 78 Drainage Act process on its own initiative; the City would have been required to do so at the request of CNR.

156. At the risk of groundless speculation, my instinct is that there was more going on in the Mandaumin Drain watershed than just restrictions in the culverts installed by CNR in 2001. If the flooding was the result of the 2001 culverts, the flooding would have appeared shortly after their installation, but it was a decade or more before those affected in the watershed felt the need to seek remedial steps. Without knowing the circumstances, it is not possible to know whether the more recent severity of flooding was caused or exacerbated by changes in the runoff coefficients of different land uses in the watershed upstream from the culverts, such as the construction of buildings and paving of parking lots on lands previously used for agricultural purposes in 2001. Simply restoring the Mandaumin Drain to outdated specifications may not meet current engineering standards or adequately reflect current conditions in the drainage area, including CNR’s railway standards.

157. In its decision, the Agency finds that Sarnia intends for the project to improve the flow of water through the Mandaumin Drain so that it can provide better drainage for adjacent property owners in order to prevent, or at least reduce the likelihood of, flooding in the area.

158. In its decision, the Agency determines that the primary benefit of the project is to Sarnia because it will address flooding of land in the watershed. As Sarnia owns no land in the watershed and therefore does not appear on the assessment schedule of the original engineer’s report, it is perplexing how the Transportation Agency could conclude that Sarnia is a beneficiary. However, if the Transportation Agency was not conflating the City of Sarnia itself with Sarnia in its capacity as the statutory administrator of the Drainage Act and understood that Sarnia’s allocated half would be assessed to the Mandaumin Drain in accordance with the assessment schedule in the most recent engineer’s report on the drain, then the Transportation Agency’s determination is perfectly logical..

159. The Agency goes on to reflect that CNR has some responsibility because it altered the municipal drain without input from an independent drainage engineer and without any authority under the Drainage Act. The Agency decides on a 50:50 split between CNR and Sarnia. Again, this makes sense if the Transportation Agency was not conflating the City of Sarnia per se, and Sarnia in its capacity as the administrator of the Drainage Act in connection with the Mandaumin Drain and if the federal subsection 16(4) of the Railway Safety Act and provincial Drainage Act are applied concurrently in a complementary manner. In this way, the municipal 50% would be assessed in accordance with the assessment schedule in the most recent engineer’s report for the Mandaumin Drain.

160. In the Sarnia Transportation Agency Decision, it is clear that the Agency was aware of the Drainage Act and the assessment schedule from the most recent engineer’s report on the Mandaumin Drain. No notice was given of CNR’s application to the Transportation Agency to any of the assessed owners, nor were they given any opportunity to be heard before the decision was made. That is confirmation that the Transportation Agency did not intend to alter the Drainage Act assessment schedules from the most recent engineer’s report, directly or indirectly.

161. The Drainage Act is mentioned numerous times in the Sarnia Transportation Agency Decision without any suggestion that it did not apply concurrently and in a complementary manner, much less that the Sarnia Transportation Agency Decision intended to supersede the Mandaumin Drain assessment schedule authorized under the Drainage Act. Indeed, the Transportation Agency had before it the question of whether the Drainage Act was inapplicable by virtue of the doctrine of interjurisdictional immunity or was inoperative with respect to CNR by virtue of the doctrine of federal paramountcy. The Transportation Agency found that it was not necessary to respond. That is consistent with the Transportation Agency’s understanding that the federal and provincial legal schemes can apply concurrently and in complementary ways.

162. The Transportation Agency conducted a “paper hearing” before deciding; that is, there was no oral argument by counsel for the parties. The Attorney General for Ontario was entitled to Intervenor status because of the Notice of Constitutional Question filed by CNR; others seeking intervenor status were denied. While it is a matter for the Transportation Agency to govern its own process and procedures, the interventions and oral submissions by counsel for all intervenors in this Court of the Drainage Referee were especially enlightening.

163. The Attorney General for Canada was given the Notice of Constitutional Question by CNR in the Sarnia Transportation Agency Case. The Attorney General for Canada was also given the Notice of Constitutional Question by CPR in this case. The Attorney General for Canada was given notice of the preliminary constitutional question in this proceeding. The Attorney General for Canada has not intervened in any of these proceedings.

The Supplementary Questions

164. The intervenors took no position about any of the supplementary questions. In the case of the railways, they submitted that they did not need to be answered because the preliminary constitutional question was to be answered in the affirmative, so they were moot or hypothetical. The Attorney General for Ontario specifically took no position. Others simply bypassed them or made a fleeting comment.

165. The answers to the supplementary question are, however, important to how the railways and municipalities conduct their relationships and interactions in the future, so, despite the lack of interest, I intend to address the questions. Some of the answers will be similar and overlap. I will start, however, with the individual questions, the first of which is:

If the answer to question (a) is no, then (i) are the Municipality’s expenses of an application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way to be charged to the Shaw Branch Drain and assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report, and (ii) do those expenses represent an increase in the cost of the Drainage Works caused by the existence of the works of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

166. The Municipality’s expenses of an application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way are necessary, according to CPR. It is said that the crossing may not be constructed without the authority of the Transportation Agency; therefore, the costs of seeking that authorization are to be charged to the Shaw Branch Drain to be assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report. So, the answer to item (i) is yes.

167. Section 26 of the Drainage Act is quoted in paragraph 115 above. It says that the CPR shall be assessed for and shall pay all the increase of cost of such drainage works caused by the existence of CPR’s railway right-of-way. The application to the Transportation Agency is only necessary because the CPR railway right-of-way exists. The costs of the application to the Transportation Agency are extra costs which would not be incurred if the CPR railway right-of-way did not exist. So, the answer to item (ii) is also yes.

If the answer to question (a) is no, then (i) are the costs of any works in addition to the Drainage Works required by the Transportation Agency as a condition of an Order authorizing the construction of the Drainage Works across the CPR right-of-way to be charged to the Shaw Branch Drain and assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report and, (ii) do those expenses represent an increase in the cost of the Drainage Works caused by the existence of the works of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

168. The Municipality’s application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way is necessary, according to CPR. It is said that the crossing may not be constructed without the authority of the Transportation Agency. To qualify for the authorization, the Transportation Agency requires work in addition to what is contemplated by the Engineer’s Report. The cost of any such additional work is to be charged to the Shaw Branch Drain and assessed and paid for in accordance with the assessment schedules in the Engineer’s Report. So, the answer to item (i) is yes.

169. Section 26 of the Drainage Act is quoted in paragraph 115 above. It says that the CPR shall be assessed for and shall pay all the increase of cost of such drainage works caused by the existence of CPR’s railway right-of-way. The application to the Transportation Agency is only necessary because the CPR railway right-of-way exists. The costs of any additional work required by the Transportation Agency, in addition to what is contemplated by the Engineer’s Report, would not be incurred if the CPR railway right-of-way did not exist. So, the answer to item (ii) is also yes.

If the answer to question (a) is no, and the Municipality enters into an agreement with CPR, either of its own volition or as a requirement or condition of an Order authorizing the construction of the Drainage Works across the CPR right-of-way, which agreement requires works in addition to the Drainage Works, (i) are the Municipality’s costs of such additional works to be charged to the Shaw Branch Drain and assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report and, (ii) do those expenses represent an increase in the cost of the Drainage Works caused by the existence of the works of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

170. The Municipality’s application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way is necessary, according to CPR. The alternative is an agreement with CPR to allow the crossing. It is said that the crossing may not be constructed without the authority of the Transportation Agency or a CPR agreement. If to qualify for the authorization, the Transportation Agency or the CPR agreement requires work in addition to what is contemplated by the Engineer’s Report, the cost of any such additional work is to be charged to the Shaw Branch Drain to be assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report. So, the answer to item (i) is yes.

171. Section 26 of the Drainage Act is quoted in paragraph 115 above. It says that the CPR shall be assessed for and shall pay all the increase of cost of such drainage works caused by the existence of CPR’s railway right-of-way. The application to the Transportation Agency or a CPR agreement is only necessary because the CPR railway right-of-way exists. The costs of any additional work required by the Transportation Agency or a CPR agreement, in addition to what is contemplated by the Engineer’s Report, would not be incurred if the CPR railway right-of-way did not exist. So, the answer to item (ii) is also yes.

If the answer to question (a) is no, then (i) is any payment required to be made by the Municipality as ordered by the Transportation Agency in connection with an application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way or imposed by the Transportation Agency as a condition of the Transportation Agency’s Order authorizing the construction of the Drainage Works across the CPR right-of-way to be charged to the Shaw Branch Drain to be assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report and, (ii) do any such payments represent an increase in the cost of the Drainage Works caused by the existence of the works of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

172. The Municipality’s application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way is necessary, according to CPR. It is said that the crossing may not be constructed without the authority of the Transportation Agency. If any payment is required to be made by the Municipality as ordered by the Transportation Agency in connection with an application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way, or any payment is imposed by the Transportation Agency as a condition of the Transportation Agency’s Order authorizing the construction of the Drainage Works across the CPR right-of-way, the amount of any such payment is to be added to the cost of the Drainage Works and charged to the Shaw Branch Drain to be assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report. So, the answer to item (i) is yes.

173. Section 26 of the Drainage Act is quoted in paragraph 115 above. It says that the CPR shall be assessed for and shall pay all the increase of cost of such drainage works caused by the existence of CPR’s railway right-of-way. The application to the Transportation Agency is only necessary because the CPR railway right-of-way exists. Any payment required to be made by the Municipality as ordered by the Transportation Agency in connection with an application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way, or any payment imposed by the Transportation Agency as a condition of the Transportation Agency’s Order authorizing the construction of the Drainage Works across the CPR right-of-way, the amount of any such payment would not be paid if the CPR railway right-of-way did not exist. So, the answer to item (ii) is also yes.

If the answer to question (a) is no, and the Municipality enters into an agreement with CPR, either of its own volition or as a requirement or condition of an Order authorizing the construction of the Drainage Works across the CPR right-of-way, which agreement requires any payment to be made by the Municipality, (i) is the amount of such payment to be charged to the Shaw Branch Drain and assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report and, (ii) does such payment represent an increase in the cost of the Drainage Works caused by the existence of the works of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

174. The Municipality’s application to the Transportation Agency to authorize the construction of the Drainage Works across the CPR right-of-way is necessary, according to CPR. The alternative is an agreement with CPR to allow the crossing. It is said that the crossing may not be constructed without the authority of the Transportation Agency or a CPR agreement. If to qualify for the authorization, the Transportation Agency or the CPR agreement requires any payment to be made by the Municipality, the amount of any such payment is to be added to the cost of the Drainage Works and charged to the Shaw Branch Drain to be assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report. So, the answer to item (i) is yes.

175. Section 26 of the Drainage Act is quoted in paragraph 115 above It says that the CPR shall be assessed for and shall pay all the increase of cost of such drainage works caused by the existence of CPR’s railway right-of-way. The application to the Transportation Agency or a CPR agreement is only necessary because the CPR railway right-of-way exists. If to qualify for the authorization of the crossing, the Transportation Agency or the CPR agreement requires any payment to be made by the Municipality, the amount of any such payment would not be paid if the CPR railway right-of-way did not exist. So, the answer to item (ii) is also yes.

If the answer to question (a) is no, then (i) are the Municipality’s expenses of this application to be charged to the Shaw Branch Drain and assessed to and paid for in accordance with the assessment schedules in the Engineer’s Report and, (ii) do those expenses represent an increase in the cost of the Drainage Works caused by the existence of the CPR railway right-of-way, to paraphrase section 26 of Act, and as such are they to be added to the Special Assessment against the CPR owned railway right-of-way lands?

176. The Municipality’s expenses of this application to the court of the Drainage Referee are necessitated by CPR’s insistence that, absent CPR’s agreement, only the Transportation Agency can authorize the construction of the Drainage Works across the CPR right-of-way. It is said that the crossing may not be constructed without the authority of the Transportation Agency or a CPR agreement. This application is to determine the correctness of CPR’s position. Counsel for CPR submits that the Municipality’s expense of this application should be dealt with in the same manner as any other application to the court of the Drainage Referee under the authority of the Drainage Act. He referred to section 118 of the Drainage Act. I agree. The Municipality’s expenses of this application are nonetheless chargeable to the Shaw Branch Drain to be assessed and paid for in accordance with the assessment schedules in the Engineer’s Report. So, the answer to item (i) is yes.

177. Because the Municipality’s expense of this application should be dealt with in the same manner as any other application to the court of the Drainage Referee under the authority of the Drainage Act, Section 26 of the Drainage Act does not necessarily apply. I am not deciding the extent to which, if at all, Section 26 of the Drainage Act has application. However, for the purposes of answering this supplementary question, the answer to item (ii) is no.

If the answer to question (a) is no, then is the Municipality prohibited by sections 106 and 107 of the Municipal Act, 2001 from paying or reimbursing, directly or indirectly, CPR for the amount of any Drainage Act assessments that CPR is required to pay or from exempting CPR from paying such Drainage Act assessments?

178. This question questions whether the Municipality has the statutory authority to reimburse CPR for any Drainage Act assessment CPR is required to pay or to to exempt CPR from the Drainage Act assessment.

179. The Municipality has the authority to enter into an agreement with CPR concerning many aspects of the Shaw Branch Drain crossing of its railway right-of-way to ensure that the Shaw Branch Drain crossing will not compromise CPR’s railway right-of-way or rail traffic using the right-of-way or put at risk the safety and security of the public and personnel, or the protection of property and the environment. The concern is, however, for reasons discussed below, there may be statutory constraints on what the Municipality is permitted to do about altering assessments established after due process under the Drainage Act.

180. Insofar as the Municipality paying out of its general funds what CPR is otherwise required to pay under the Drainage Act, section 106 of the Municipal Act appears to prohibit it. Section 106 provides as follows:

Assistance Prohibited

106(1) Despite any Act, a municipality shall not assist directly or indirectly any manufacturing business or other industrial or commercial enterprise through the granting of bonuses for that purpose.

Same

106(2) Without limiting subsection (1), the municipality shall not grant assistance by,

(a) giving or lending any property of the municipality, including money;

(b) guaranteeing borrowing;

(c) leasing or selling any property of the municipality at below fair market value; or

(d) giving a total or partial exemption from any levy, charge or fee.

Exception

106(3) Subsection (1) does not apply to a council exercising its authority under subsection 28 (6), (7) or (7.2) of the Planning Act or under section 365.1 of this Act..

General Power to make Grants

107(1) Despite any provision of this or any other Act relating to the giving of grants or aid by a municipality, subject to section 106, a municipality may make grants, on such terms as to security and otherwise as the council considers appropriate, to any person, group or body, including a fund, within or outside the boundaries of the municipality for any purpose that council considers to be in the interests of the municipality.

Loans, Guarantees, etc.

107(2) The power to make a grant includes the power,

(a) to guarantee a loan and to make a grant by way of loan and to charge interest on the loan;

(b) to sell or lease land for nominal consideration or to make a grant of land;

(c) to provide for the use by any person of land owned or occupied by the municipality upon such terms as may be fixed by council;

(c.1) to provide for the use by any person of officers, employees or agents of the municipality upon such terms as may be fixed by council;

(d) to sell, lease or otherwise dispose of at a nominal price, or make a grant of, any personal property of the municipality or to provide for the use of the personal property on such terms as may be fixed by council; and

(e) to make donations of foodstuffs and merchandise purchased by the municipality for that purpose.

181. I am disappointed that I did not receive submissions from the parties or intervenors in response to this last preliminary question. The Municipality is prohibited from paying out of general municipal funds any of CPR’s share of the cost of the Drainage Works either by making a grant as prohibited by subsection 106(1) of the Municipal Act or by giving an exemption from any levy, charge or fee as prohibited by clause 106(2)(d) of the Municipal Act. I am therefore concerned about whether the Municipality has the authority to do so or to enter into a contract with CPR for the same purpose, if, in fact, they are prohibited from doing so. In addition to all of that, I observe that there is no provision in the Drainage Act which authorizes the Municipality to enter into agreements which would deviate from the assessment rules, procedures and requirements of the Drainage Act.

182. There are a few instances where the Drainage Act contemplates that a municipality may or is required to make payments out of its general funds.

(a) Subsection 6(2) of the Act provides that the cost of an environmental appraisal obtained by a municipality on its own initiative is to be paid from the municipality's general funds.

(b) Subsection 7(2) of the Act made a similar provision with respect to a benefit-cost statement.

(c) Subsection 58(3) of the Act provides that if a by-law is repealed before work is commenced and before assessments have been levied against land assessed, the municipality is to pay all expenses out of general funds.

(d) Subsection 93(4) of the Act contemplated that remuneration of a drainage superintendent not chargeable to any particular drainage works is to be paid out of the municipality’s general funds.

(e) Subsection 118(2) of the Act authorizes the Referee to order a municipality to pay some or all of the damages and costs payable by a municipality under the Act if attributable to any improper action, neglect, default or omission on the part of the council of any municipality or of any of its officers or employees.

183. These are the rare exceptions to the rule that the municipality administering the Act, as required by the Act, is not the ultimate payor for the costs of constructing, maintaining, and repairing municipal drainage works; those whose lands use or contribute water to the drainage works pay the costs of constructing, maintaining, and repairing the drains. The Municipality is simply a conduit. Whatever costs are incurred by a local municipality in the Drainage Act processes, including construction, maintenance and repair of drainage works, are passed on to those assessed for the drainage works in accordance with the assessment schedule found in the most recent engineer’s report on the drain.

184. There is no room in this legislative scheme for a municipality to be paying out of municipal general funds assessments levied against railway right-of-way lands or providing exemptions for such assessments. So, the answer to the question is yes, the Municipality is prohibited by sections 106 and 107 of the Municipal Act from paying or reimbursing, directly or indirectly, CPR for the amount of any Drainage Act assessments that CPR is required to pay or from exempting CPR from paying such Drainage Act assessments.

Future Proceedings in this Application

185. Notwithstanding the Municipality’s reservations about the Transportation Agency’s jurisdiction, as set out in paragraph 12 of the Order, the Municipality is ordered to make an application to the Transportation Agency for authorization for the Shaw Branch Drain to cross the CPR railway right-of-way as contemplated by the Engineer’s Report. In doing so, the Municipality is not to be taken as acknowledging or attorning to the jurisdiction of the Transportation Agency, nor is it precluded from making submissions that the Transportation Agency does not have the jurisdiction or authority to make such an order.

186. The hearing of this application in the court of the Drainage Referee is now adjourned sine die, but I will remain seized.

187. As provided in paragraph 14 of the Order, the hearing may resume at the request of any party

(a) If it is determined by the Transportation Agency or a court of competent jurisdiction that the Transportation Agency lacks jurisdiction and authority to sanction the crossing by a municipal drain of a railway right-of-way or

(b) if the Transportation Agency refuses to consider the Municipality’s application or fails within a reasonable time to exercise its authority to decide on the Municipality’s application or

(c) if there is some aspect of the Engineer’s Report or the Drainage Act as it applies to the Shaw Branch Drain, which requires interpretation or clarification.

188. If it is necessary for the hearing to resume, the presiding Referee will continue from where it was left with a pre-hearing case management conference to address the following:

(a) Scheduling production of documentation by the parties and examinations for discovery.

(b) Scheduling pre-hearing production and exchange of documents, including affidavits or witness statements for expert witnesses and affidavits or evidence summaries for other witnesses.

(c) Establishing an issues list.

(d) Identifying the number and nature of witnesses to be called by each party.

(e) Estimating the amount of time required for the hearing.

(f) Setting the commencement date for the hearing.

(g) Making provisions about access to and login credentials for participants in the hearing.

(h) Providing for service by personal service, registered mail or electronically (unless a statute or the Referee requires another method of service).

(i) Dealing with such other matters or things as may arise and which the presiding Referee may determine is expedient to permit.

189. If no request is made for the resumption of the hearing and the Municipality’s application to the Transportation Agency is finally disposed of, this application may be settled as the parties agree. If I have not heard from the parties about how this application is to be dealt with by the end of 2026, I will convene a video conference after that date to receive a status report from the parties.

190. There will be no costs awarded in this application to the date of the Order. This is clearly a test case, with results that are significant for interprovincial railway companies operating in Ontario and for municipalities in the Province alike. It is in the public interest that the preliminary constitutional question be asked and answered.

at London, this October 22, 2025.

Andrew C. Wright Acting Drainage Referee

Plan of the Shaw Branch of the Facey East Drain

Extracted from the Engineer’s Report