Court File and Parties

COURT FILE NO.: C-868-12 DATE: 2019-05-31 ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

GODERICH-EXETER RAILWAY COMPANY LIMITED, Plaintiff - and – SHANTZ STATION TERMINAL LTD. and PARRISH and HEIMBECKER LIMITED, Defendants

Counsel: Kenneth Peel, Counsel for the Plaintiff Robert Reynolds and Forrest Hume, Counsel for the Defendants

HEARD: September 10, 11, 12, 13, 14, 19, 20 and 21; and November 19 and 22, 2018

The Honourable Justice Catrina D. Braid

REASONS FOR JUDGMENT

I. OVERVIEW

[1] “Time is money”, the old adage goes. This is certainly so in the transport sector, which has developed the legal concept of “demurrage”. In short, demurrage is a charge levied when it takes longer than anticipated to load or unload goods in transit.

[2] Goderich-Exeter Railway Company Limited (GEXR) is a railway company that operated a shortline track that crosses through the Region of Waterloo. This track, called the Guelph Line, is owned by Canadian National Railway (CN) and connects to lines that are operated by CN.

[3] Parrish and Heimbecker (P&H) is a Canadian grain company that ships grain from Western Canada to Ontario.

[4] Shantz Station Terminal Ltd. (Shantz Station) is a company that P&H incorporated to offer grain terminal and rail transit load facilities. It operates the Shantz Station Terminal in Breslau, which is located along the Guelph Line.

[5] GEXR asserts it has the right to charge demurrage to P&H in accordance with its published tariff for the delayed unloading of railcars at the Shantz Station Terminal. P&H has refused to pay the charges on the basis that, in the absence of a contract between them, GEXR has neither the contractual right nor the legislative authority to exact demurrage. P&H has always been prepared to pay demurrage at Shantz Station, but subject to the invoices coming from CN and not GEXR.

[6] The following issues arise in this case:

A. Does the CTA and the GEXR Tariff empower GEXR to levy demurrage against P&H? B. Does an express or implied contract with GEXR bind P&H to pay demurrage? C. If the answers to the first two questions are “no”, has P&H been unjustly enriched at GEXR’s expense?

[7] For the reasons set out below, I find that GEXR’s claim against P&H for demurrage must fail.

II. FACTS

[8] For the most part, the facts in this case are not in dispute. It is the legal effect of those facts that is at issue. I shall set out my findings of fact below:

i. The Parties

[9] GEXR is a railway company that offers railway services in Southwestern Ontario. Through a rail track lease agreement with CN, GEXR provided rail services over the Guelph Line which runs from Georgetown to London, Ontario. The Guelph Line is also sometimes referred to as the GEXR line.

[10] GEXR held a federally-issued Certificate of Fitness from the Canadian Transportation Agency (the Agency), which granted it authority to be the only authorized operator on the Guelph Line during the period of its lease agreement with CN. This Certificate of Fitness was issued pursuant to Canadian Transportation Agency Decision No. 552-R-1998. Pursuant to subsections 92 (1) and 92 (2) of the Canada Transportation Act, S.C. 1996, c. 10 (CTA), the Certificate permitted GEXR to operate several lines of railway in the province of Ontario, including the Guelph Line. Pursuant to this Certificate, GEXR had all of the obligations and status of a railroad under federal legislation.

[11] P&H is a Canadian grain company that handles and trades cash grain in Western Canada, Ontario, and the Maritimes. Much of the P&H traffic originates at grain elevators in Saskatchewan and Manitoba that are along CN rail lines. P&H ships grain eastward from the prairies and is a supplier to the Eastern Canadian flour milling industry.

[12] The defendant Shantz Station is a subsidiary of the defendant P&H. In or about 2003, P&H built Shantz Station Terminal in Breslau, which is located along the Guelph Line. The facility began operations in the fall of 2003. P&H is the only customer using this terminal, which is primarily an unloading facility. Both Shantz Station and P&H are “shippers” within the meaning in section 6 of the CTA.

ii. GEXR Tariff for Demurrage

[13] The availability of railcars to move goods is a crucial element of the economic operations of a railway. Nevertheless, railway companies allow shippers a reasonable period of “free time” for loading or unloading railcars when equipment is placed at the shipper’s disposal. The railcars are provided for the purpose of transport and not for storage. When a shipper exceeds the time period to unload the freight and thereby withholds the railcars from transport service, the shipper may be liable to pay demurrage.

[14] GEXR issued a tariff, which included terms regarding demurrage. Under the tariff’s demurrage terms, there is a provision for a free day for an empty car going in for loading and two free days for a railcar going in for unloading. After this “free time”, demurrage charges begin to accrue. The tariff was intended to be an incentive to shippers to bring extra crew to unload and promptly release any railcars so that they can be used by other customers; and to offset car hire costs for which GEXR is liable. It also provides a disincentive to use the cars for storage.

iii. P&H Proposal to CN for the Movement of Grain

[15] Prior to the construction of Shantz Station, P&H moved most of its milling wheat by vessel from Thunder Bay through terminals at Goderich and Owen Sound. However, in or around 2001, Robert Bryson of P&H approached CN with a proposal to ship their wheat directly by rail rather than shipping large blocks by boat.

[16] CN had established a scheduled carrier program which shipped railcars from Winnipeg every day at the same time, even if there were insufficient cars to fill the shipment. P&H proposed to have a high volume of grain cars ready to be shipped. CN would bring in the grain from all stations and collect the cars in Winnipeg. CN would determine the number of P&H grain cars that would be added to fill each daily shipment.

[17] Ideally, car loads of grain shipped to a P&H terminal by rail would arrive at its destination in convenient blocks of 25 cars. From a shipper’s perspective, consistent numbers of blocks of cars being shipped at origin is better as it permits the shipper to coordinate and unload cars upon arrival. Predictability improves the movement along the supply chain.

[18] Under this proposal, the number of P&H grain cars on each daily shipment would fluctuate and would be dependent on decisions CN made, who would use the grain cars to fill out scheduled trains to Toronto. The proposal was appealing to CN because it wanted to run the scheduled carrier program, and milling wheat was the perfect commodity to fill the back end of their trains.

[19] “Bunching” is a term used in the railroad industry to describe the irregular receipt of rail cars. Bunching may cause an oversupply of cars, which then causes a delay in unloading at destination. This can impact the shipper’s ability to unload the cars within the timeline available in the demurrage tariff.

[20] Under this proposal, the number of cars received at destination was prone to fluctuation and might not consistent with the number of shipped cars that P&H requested from CN. For example, if P&H wished to ship 75 rail cars of grain a week from Western Canada, there could be two weeks in which CN shipped no cars to P&H (which would result in a shortfall) and then all of the cars would be shipped in the third week, arriving at the terminal at the same time. As a result, the defendants would not be able to unload the cars within the free time allotted. The proposed arrangement between P&H and CN would directly cause this fluctuation, which would then cause demurrage issues. CN would create deliberate bunching that would lead to delays in unloading, for which P&H believed they should not have to pay demurrage.

[21] As part of this proposal, P&H wanted to build a grain terminal on a CN-operated line in Ontario that was centrally located to four flour mills that P&H supplied. P&H negotiated with the mill owners and with CN. The mill owners committed to shipping specific volumes of grain by rail; and CN agreed that the mills would not be rendered uncompetitive against mills that shipped by vessel.

[22] Macmillan Yard is CN’s major rail yard in Toronto. P&H and CN looked at a number of possible locations for the construction of a central terminal close to MacMillan Yard. All of the locations initially proposed were on CN-operated lines. After various proposed sites on CN-operated lines proved to be unworkable, CN proposed that the terminal be built on the Guelph Line.

[23] P&H expressed concerns to CN about locating the terminal on a shortline railroad. P&H was mainly concerned about the financial solvency of the shortline. It had experienced difficulties in the past with the location of a facility on a shortline and did not want to have these difficulties again. P&H wanted solely to deal with CN and wanted no commercial relations with GEXR.

iv. Memorandum of Understanding Between CN and P&H

[24] P&H’s proposal led to the negotiation of a Memorandum of Understanding that was ultimately entered into by CN and P&H.

[25] Representatives of CN reassured Mr. Bryson that P&H would not be disadvantaged as a result of locating its terminal on the Guelph Line. They stated that only CN would invoice P&H for demurrage and that CN standard demurrage practices would be applied. CN drafted a Memorandum of Understanding (MOU), which was the agreement between CN and P&H. Based on the MOU, P&H agreed to build a terminal at Breslau on the Guelph Line.

[26] The reasons for P&H’s concerns about building on the shortline were addressed in the evidence at trial and appear to be in dispute. In my view, the reasons for those concerns are not particularly relevant to the issues in this case. Whatever the concerns might have been, P&H negotiated and received assurances from CN that it would not be disadvantaged by building its terminal on the shortline.

[27] Representatives of P&H and CN signed a Memorandum of Understanding on March 12, 2003, which included the following terms:

Rail Marketing/Service Commitment

17. CN and GEXR have entered into an agreement Guelph Line - Operating, Marketing and Interchange Agreement, covering the provisions of rail service, market pricing and other contractual conditions on the GEXR line.
18. This Agreement Guelph Line - Operating, Marketing and Interchange Agreement is in effect for a period of 20 years expiring on November 15, 2018.
19. CN confirms that within this Agreement, CN will continue to be the carrier shown in rates, routes and divisions, and to quote freight rates, published tariffs, enter into contracts and collect for its own account all related revenues and applicable freight for traffic destined to or originating from stations on the GEXR, which will travel over CN lines.…
20. CN agrees that if the GEXR cannot provide rail service for five consecutive calendar days from the last service day, CN will transit load and truck the grain and grain products from a CN station to the proposed Terminal at no additional cost to P&H, until rail service can be provided in a consistent manner by the GEXR or CN…

Terminal Unloading Times

25. CN standard demurrage practices will be applied – CN Tariff 9000.

[28] The MOU also includes a dispute resolution clause requiring that the parties arbitrate any dispute that cannot be resolved between them.

[29] Mr. Bryson testified about the negotiations leading to the MOU. In large measure, his evidence about the surrounding circumstances was uncontradicted. Some of what Mr. Bryson said on the stand was hearsay and cannot be considered for the truth of its contents. I shall only consider his statements regarding what CN told P&H to assist with understanding P&H’s beliefs and intentions.

[30] None of the parties called a representative of CN to testify at this trial. The defendants ask the court to draw an adverse inference against GEXR; and to make a finding that GEXR did not call any CN witnesses because it anticipated that CN’s evidence would not assist GEXR but would instead confirm Mr. Bryson's testimony.

[31] In the appropriate case, the court may draw an adverse inference from the failure to call witnesses. However, the circumstances in which an adverse inference may be drawn will be rare and should only be done with caution. Where uncalled witnesses are equally available to any party, an adverse inference will be unwarranted: see Sopinka, Lederman & Bryant, The Law of Evidence in Canada 5th ed. (Markham: LexisNexis, 2018) at paras. 6.471–6.472; R. v. Jolivet, 2000 SCC 29, [2000] 1 S.C.R. 751.

[32] In light of the fact that any party could have called CN witnesses, I decline to draw any adverse inference from the failure of GEXR to call such a witness.

[33] The evidence of the surrounding circumstances, including the genesis and business purpose of an agreement, is admissible when conducting contractual interpretation. This should consist only of objective evidence of the background facts at the time of the execution of the contract and includes anything that would have affected the way in which the language of the document would have been understood by a reasonable person: see Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633.

[34] I find that the word “all related revenues” in paragraph 19 of the MOU includes demurrage, and that the word “Agreement” in paragraph 19 refers to the Operating, Marketing and Interchange Agreement between CN and GEXR. Paragraphs 17 to 25 reflected CN’s assurances to P&H that only CN would invoice P&H for demurrage. I make these findings on the basis of a plain reading of the MOU and its terms as well as the surrounding circumstances regarding the negotiation and entering into of the MOU. The MOU is not ambiguous, so I need not turn to the subjective intentions of the parties at the time the contract was drawn to interpret the contract.

[35] For reasons that are unclear, portions of the MOU are directly contrary to CN’s agreement with GEXR, especially as it relates to GEXR’s ability to bill accessorial charges.

v. GEXR Agreement With CN

[36] In 1998, GEXR and CN entered into the “Guelph Line Operating, Marketing and Interchange Agreement”. Pursuant to this operating agreement, GEXR was the exclusive operator of the Guelph Line. P&H is not a party to this agreement.

[37] The Agreement stated that CN would continue to market the services on the Guelph Line. CN would continue to be the carrier shown in rates, routes and divisions, and to quote freight rates, publish tariffs, enter into contracts, and collect for its own account all related revenues and applicable freight subsidies for traffic to and from stations on the Guelph Line which will travel over CN lines. It was further agreed that GEXR would have the exclusive right and responsibility to publish tariffs and enter into contracts governing the handling of intra-line traffic as well as collect for its own account only all related revenues, including any applicable subsidies.

[38] The agreement further stated that CN would pay GEXR a haulage fee. GEXR would be responsible for paying for all car hire charges on individual freight cars in its possession, and CN would pay a reclaim of the car hire in accordance with the agreement. GEXR’s exposure to car hire costs is unknown due to the fact that GEXR has refused to disclose the details of the car hire reclaim agreement that it has with CN.

[39] Notably, the agreement between GEXR and CN stated that GEXR “is responsible for invoicing customers for demurrage.” It stated that GEXR shall have the right to publish tariffs or enter into contracts governing incidental services to normal interline movements, such as demurrage at stations located on the Guelph Line, and to collect such charges.

[40] GEXR agreed that it would not reduce the service frequency along the Guelph Line without CN’s consent. The agreement also provided for joint performance reviews annually.

vi. Movement of Railcars to Shantz Station

[41] Railcars carrying P&H grain originated in Western Canada. When P&H wished to send shipments, CN would create a waybill or bill of lading for each shipment that described P&H as shipper and consignee with the “care of party” listed as Shantz Station.

[42] From the time that Shantz Station was built until November 2018, GEXR handled all railway cars moving to and from Shantz Station Terminal. CN would send a waybill to GEXR, setting out the origin, destination, commodity, weight, consignee, etc. GEXR was required to take railcars from the CN line and interchange them onto the Guelph Line. GEXR engines would pick up the cars at MacMillan Yard and take them to Shantz Station.

[43] GEXR would provide P&H with an online patron report which listed the car numbers, commodity weight, customer name and address, and destination. The defendants would direct GEXR regarding the placement of those rail cars and would notify GEXR when the empty rail cars could be picked up. The defendants would control when the empty car could be released.

[44] The railcars were not the property of the parties. GEXR paid car hire costs to the rail car owners, which was an hourly rate from the time it received the car until it was interchanged to another line. GEXR has an agreement with CN that permits GEXR to reclaim a certain amount of car hire hours from CN.

[45] Grain would be loaded from rail cars onto trucks at the Shantz Station Terminal and then moved to various flour mills in Ontario.

vii. Differences between CN and GEXR Tariff

[46] Both CN Tariff 9000 and the GEXR tariff regarding extended asset use allowed for two free days at unloading and provided offset credit when cars were unloaded in less than the allocated time. CN’s car charges per day were slightly higher that GEXR’s car charges.

[47] Critically, the CN and GEXR tariff treat bunching differently. CN Tariff 9000 states that when CN places more railcars than ordered earlier or later than the date P&H ordered, it is to be treated as a railroad error. The GEXR tariff did not treat bunching as a railroad error and did not give credit for bunching.

[48] There is some dispute about how CN Tariff 9000 is to be read regarding bunching since the tariff only includes a reference to credit for bunching at loading and not at unloading. However, P&H states that deliberate CN bunching occurred at loading, which (in the view of P&H) means that CN should provide a credit when the cars arrive bunched for unloading.

[49] Demurrage is generally a fault-based tariff. In this case, CN caused much of the delay at Shantz Station because the scheme of the MOU resulted in deliberate bunching of cars at the source. GEXR would have had no knowledge of CN’s deliberate bunching at loading because this would occur on CN lines. Practically speaking, this would make it difficult for GEXR to assign credit for bunching that CN caused.

[50] GEXR states that it published tariffs and that it notified the defendants of any changes to its tariff. Updates were emailed to the defendants, and an employee would follow-up with a phone call or email. P&H does not dispute that it received copies of the tariff from GEXR.

viii. GEXR Invoices for Demurrage

[51] Shantz Station Terminal opened in the fall of 2003. For the first three years of the terminal’s operation, GEXR did not invoice the defendants for demurrage or any other carriage charges.

[52] An internal email from Douglas Mackenzie (GEXR’s general manager) dated March 31, 2011, has been filed in this trial. This email describes the early history between the parties at the time that Shantz Station began its operations in 2004: “Shantz kept insisting that, as part of their freight deal with CN, there was to be no demurrage charges. Until 2008, it was just accepted [by GEXR] that this was the case.” This portion of the email is consistent with both parties’ evidence at trial, namely that the defendants have always maintained that GEXR cannot charge them demurrage because of P&H’s agreement with CN.

[53] GEXR first invoiced the defendants for demurrage in 2005. In response, P&H emailed GEXR and stated that it would not pay demurrage invoices, as per their agreement with CN. The defendants refused to provide a copy of the agreement to GEXR because the agreement was confidential. Around that time, CN advised GEXR that no agreement prevented GEXR from charging demurrage; however, the defendants were adamant that there was such an agreement.

[54] In 2006 and 2007, GEXR sent invoices for demurrage to Shantz Station. P&H returned the invoices and restated its position that it did not accept demurrage invoices from GEXR in light of P&H’s agreement with CN. P&H stated that its agreement was directly with CN with regards to service, rates, and incidental charges, including demurrage; and that GEXR has no authority to impose demurrage charges or any other fees to Shantz Station.

[55] GEXR wrote off these unpaid invoices sent in 2006 and 2007. Between August 2008 and July 2010, GEXR did not send any invoices to the defendants for demurrage. Hence, the present claim does not include any claim for demurrage prior to July 2010.

[56] In July 2010, GEXR began to send demurrage invoices again. P&H told GEXR that only CN has the right to charge and collect demurrage on P&H traffic at Shantz Station. Notwithstanding the position P&H advanced, GEXR kept sending invoices and kept providing services. At all relevant times, the defendants rejected any demurrage invoices GEXR sent to them and did not pay demurrage to GEXR.

[57] In April 2010, representatives of GEXR and the defendants met to talk about future invoicing for demurrage. The defendants repeated, yet again, their position that they had an agreement with CN that prevented GEXR from billing them for demurrage. The defendants did not provide a copy of the agreement until 2012, after this litigation had been commenced.

[58] In an email dated March 31, 2011, Mr. Mackenzie acknowledged that Shantz could likely keep its demurrage charges down, “except for the bunching that gets created usually in Western Canada, but sometimes as a result of [GEXR’s] issues getting in and out of MacYard.” The defendants agree with this observation.

ix. Threats by GEXR to Cease Service

[59] In or about June of 2011, GEXR considered the possibility of ceasing its services to P&H until the invoices were paid. GEXR requested a security deposit from P&H to ensure uninterrupted rail service. GEXR stated that the deposit was necessary to provide advanced funding for future accessorial charges, including demurrage, switching, storage, and any other applicable charges. GEXR stated that if the security deposit was not paid, GEXR would suspend service.

[60] CN told GEXR that it was not entitled to alter service without CN’s prior consent; and that CN would look to GEXR to be responsible for trucking fees to move the freight in the event of a service disruption. In the result, GEXR never insisted on the security deposit or refused service because it was concerned that CN would sue them.

[61] At one point, a three-way meeting between CN, GEXR and P&H was proposed. For reasons that are unclear, this meeting did not occur.

x. CN Invoice for Demurrage

[62] In 2011, CN agreed to invoice P&H for demurrage charges that had been invoiced by GEXR. On September 1, 2011, CN sent a cover letter to P&H stating that it would be billing for demurrage at Breslau going forward. CN enclosed a CN invoice for $257,700 for Extended Asset Use from July 2010 to July 2011. This invoice stated that CN Tariff 9000 applied and that payment should be made by cheque payable to CN.

[63] P&H did not object to being billed for demurrage by CN. Brad Wallaker of P&H reviewed the CN invoice and applied CN Tariff 9000. He believed that the invoice should be reduced because of bunching and other issues that affect demurrage. Mr. Wallaker recalculated the amount of demurrage owing and determined that more than half of the invoice was not payable. He expected that there would be a back and forth discussion regarding his recalculation, but this did not occur. There was no renegotiation by GEXR or CN in respect of the recalculated amount.

[64] In October 2011, P&H sent its response to the CN invoice. P&H provided CN with a demurrage spreadsheet showing revised amounts owing, disputed amounts, disputed reasons and balance owing. P&H paid $102,600 to CN, who in turn forwarded the funds to GEXR. Because P&H’s concerns about bunching related to movement on CN lines, GEXR was unable to understand the basis for the billing reduction and did not agree with it.

[65] After sending this invoice, CN refused to bill further demurrage on behalf of GEXR going forward. In January of 2012, P&H wrote to CN and proposed a modification to its agreement with CN that would permit GEXR to bill demurrage directly to P&H, on the condition that P&H would not be exposed to other ancillary charges from a shortline carrier. CN did not agree with this proposal.

xi. Arbitration Between CN and P&H

[66] On April 4, 2012, P&H gave CN a Notice to Arbitrate. GEXR was not a party to the arbitration. P&H sought no relief against GEXR in the arbitration, which did not deal with GEXR’s right to charge demurrage.

[67] Arbitrator Coulter Osborne determined that in the MOU, P&H and CN agreed that only CN would bill P&H for demurrage. He also found that CN had breached its MOU and its promise that CN would be the only carrier that would charge demurrage in connection with the traffic to Breslau during the term of the MOU. On August 9, 2018, the arbitrator awarded damages to P&H against CN for the breach of CN’s promise that it would be the only carrier that would charge demurrage in connection with Breslau. The quantification of damages has been adjourned until after the completion of the trial that was held before me.

[68] As a result of the arbitration ruling, and in an effort to discharge its obligations as set out in that award, CN sent an invoice to P&H dated June 13, 2018, for demurrage charges. The invoice is in the amount of $216,624.20 from August 2011 to October 2013 and is a consolidation of GEXR demurrage invoices. The invoice also states that GEXR claims $155,100 owing from the previous invoice dated August 29, 2011. Added together, these two dollar figures are approximately the amount of GEXR’s claim in this action.

[69] When the final witness was called in this action in September 2018, this invoice had not been paid. P&H states that it is prepared to process that invoice using CN Tariff 9000 but has held off because of GEXR’s claim to the same demurrage in this litigation. It is a live issue between the parties as to whether CN Tariff 9000 should apply to that invoice.

[70] The arbitrator’s ruling is not, of course, binding on this court. GEXR was not even a party to the arbitration. Although an arbitral decision may carry some evidentiary weight in a subsequent or related matter, the weight and significance to be given to the prior decision will depend on the circumstances of each case, including the similarity of the issues, the identity of the participants, the nature of the earlier proceedings, and the opportunity given to the prejudiced party to contest it: see British Columbia (Attorney General) v. Malik, 2011 SCC 18; Bank of China v. Fan, 2014 BCSC 2043.

[71] P&H argues that the arbitrator’s decision should be accorded considerable weight in this action. I decline to do so. Not only did GEXR not participate in those proceedings, I find that it is not necessary to rely on the arbitrator’s decision in light of the viva voce and documentary evidence introduced at this trial.

xii. The Failure of the Defendants to Dispute Charges

[72] When GEXR issued an invoice, the shipper was entitled to dispute the charges. According to GEXR’s protocols, any such dispute must be raised within 30 days. The defendants did not “dispute” the demurrage invoices by raising specific disputes, within 30 days, to each of the charges.

[73] I find that P&H continually rejected the invoices and that the failure to raise a billing dispute within 30 days of receiving each invoice did not constitute an admission that it was liable to pay the full amount of the invoice. I do not agree with GEXR’s assertion that the defendants are liable for the full amount invoiced simply because they did not raise a dispute in accordance with GEXR protocols.

xiii. GEXR is Not a Sub-Contractor of CN

[74] Mr. Bryson testified that, during negotiations, CN represented to P&H that GEXR was merely a subcontractor of CN. No one from CN was called to testify. Although this evidence is hearsay, it is relevant to the narrative and an understanding of P&H’s position during the relevant time periods. I do not accept this evidence for the truth of the statement.

[75] Although GEXR admits that it provided a service to CN, the evidence falls far short of establishing that GEXR was a subcontractor to CN. I find that GEXR was not a subcontractor to CN.

III. POSITIONS OF THE PARTIES

[76] In its Statement of Claim, GEXR seeks judgment of $378,074 for invoiced but unpaid demurrage charges, plus taxes. The claim includes the unpaid portion of the CN invoice plus GEXR invoices issued after the CN invoice. GEXR also claims 18% interest per annum or, in the alternative, pre-judgment interest.

[77] GEXR claims that the charges are due and owing pursuant to the course of regulated commercial dealings in a carrier-shipper relationship; pursuant to GEXR’s tariff that was published and communicated to the defendants; and/or under an express or implied contract. In the alternative, GEXR claims unjust enrichment.

[78] The defendants do not dispute that they owe demurrage. They agree that they would be liable to CN if CN billed them using the CN tariff. The issue, however, is whether the defendants are liable to GEXR for demurrage and, if so, what tariff should apply. The defendants submit that GEXR has neither the contractual right nor the legislative authority to exact demurrage; and that the claim for unjust enrichment should be dismissed.

IV. ANALYSIS

A. Does the CTA and the GEXR Tariff Empower GEXR to Levy Demurrage Against P&H?

[79] Canadian railway law is an amalgamation of legislation and common law: see H.E.B Coyne, The Railway Law of Canada (Toronto: Canada Law Book, 1947). Accordingly, legislation and common law govern demurrage.

[80] Railways charge demurrage for the detention of a freight car beyond the free time provided for by the applicable tariff. It is intended as an inducement to promptly release the freight car and, alternatively, to partially compensate the railway should the freight car be detained beyond the free time allowance: see Canadian National Railway Company v. Canadian Transportation Agency, 2008 FCA 123, 378 N.R. 121, at para. 5 citing Canadian Pacific Railway Company v. Canadian Transportation Agency, 2003 FCA 271, 307 N.R. 378, at para. 7, which also cites North-West Line Elevators Association v. Canadian Pacific Railway Company, [1959] S.C.R. 239 (S.C.C.).

[81] Demurrage is a tariff for extended asset use (extended use of the railcars) beyond the free period of time. It has a specific purpose of promoting rail efficiency and railcar usage. It is distinct from freight charges, which governs the price for the movement of traffic. Demurrage attaches against the person responsible for the delay: see North-West Line Elevators.

[82] When the railway causes the detention of a car beyond the free time, demurrage is not assessable to the shipper: see Canadian Pacific Railway Company v. Canadian Transportation Agency.

[83] Historically, railway companies were heavily regulated. However, under the Canada Transportation Act, S.C. 1996, c. 10, the Canadian railway industry became increasingly deregulated. As such, railway tariffs became commercial in nature between railway companies and customers, without regulatory interference. The CTA placed greater emphasis on commercial decision-making in the transportation sector. After 1996, the terms “rate” and “toll” were no longer defined in the legislation. Railways were left to create tariffs for demurrage and other services. Common law principles now apply to railway companies: see Canadian National Railway v. Neptune Bulk Terminals (Canada) Ltd., 2006 BCSC 1073, 60 B.C.L.R. (4th) 96.

[84] A railway’s relationship with a customer is a contractual one. Section 113 of the CTA imposes certain “common carrier obligations” on railway companies, requiring them to take, carry, and deliver traffic on “payment of the lawfully payable rate.” A railway sets the rate for the movement of the traffic; once a customer has agreed to pay the rates, the railway must deliver the cars to the destination specified in the contract: see Neptune.

[85] Section 118 of the CTA states that a railway company shall, at the request of a shipper, issue a tariff in respect of the movement of traffic on its railway. Section 119 of the CTA directs that a railway company that proposes to increase a rate in a tariff shall publish a notice of the increase and shall charge the rates in that tariff.

[86] Section 87 of the CTA defines “tariff” as “a schedule of rates, charges, terms and conditions applicable to the movement of traffic and incidental services.” “Demurrage” is not a defined term under the CTA.

[87] The CTA does not expressly limit the application of a tariff to the party with whom a railway contracts. Nor does the CTA, expressly or by implication, permit a railway to impose its tariffs on parties with whom it has no contract of carriage. The CTA does not authorize railway companies to impose tariffs on third parties. It requires railway companies to publish tariffs to inform prospective customers as to the nature and amount of the rates, charges, and penalties they will be expected to pay pursuant to the contract of carriage: see Neptune.

[88] The CTA and the Certificate of Fitness issued to GEXR do not contain explicit language stating precisely who is liable for demurrage. The legislation is silent regarding on to whom a railway may impose tariffs such as demurrage. The CTA does not go so far as to empower a railroad to unilaterally impose penalties on parties with whom it has no contractual relationship.

[89] GEXR submits that, if P&H believed that the demurrage charges were unfair, it had recourse under section 120.1 of the CTA. This section gives the shipper the right to apply to the Agency for a review of a tariff that the shipper believes is unreasonable. In my view, the remedy under section 120.1 is in place as a review mechanism for shippers who are liable to pay demurrage. P&H did not claim that the demurrage charges were unfair; they simply said they had no liability whatsoever to GEXR for demurrage. Section 120.1 is not relevant to the question of whether P&H was liable to GEXR for demurrage.

[90] To the extent that GEXR can issue a tariff pursuant to its powers under the CTA (and/or pursuant to the Certificate of Fitness), the published tariff and the CTA do not impose liability on P&H for demurrage to GEXR when there is no contract between them. Therefore, I shall examine whether there was a contract between the parties.

B. Does an Express or Implied Contract with GEXR Bind P&H to Pay Demurrage?

i. Is a Contract Necessary to Levy Demurrage?

[91] I agree with and adopt the reasoning of Wedge J. in Canadian National Railway v. Neptune Bulk Terminals (Canada) Ltd. Specifically, I find that a contract of carriage that incorporates tariff terms is necessary between two parties for the railway to levy demurrage charges. The railway may not charge demurrage to a party with whom it has no contract.

[92] While distinct from freight charges, demurrage is a tariff that a railway is entitled to exact from its customers because it relates to the movement of traffic. Customers pay the railway to move their goods from origin to unloading at the destination terminal. If demurrage is part of the rate for the movement of goods, it follows that demurrage is chargeable to the party who contracts with that railway to have the goods moved: see Neptune, at para. 95-96.

[93] For a party to be liable for demurrage, there must be a contract to that effect. The mere provision of services, even under the structure of the CTA, does not create a contract: see Compagnie des chemins de fer nationaux du Canada c. Compagnie d'arrimage de Québec ltée, 2010 QCCQ 942; and Steamship “Country of Lancaster,” Limited v. Sharp & Co. (1889), 24 Q.B.D. 158 (English Q.B.).

[94] The doctrine of privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract. Only parties to contracts should be able to sue to enforce their rights or claim damages. The concept of privity of contract is one of fairness, as it would be manifestly unfair to assign liability to a person who does not have a legal relationship with the other.

[95] For a contract to be legally enforceable, there must be consensus ad idem, or a meeting of the minds. The absence of assent to an agreement prevents the creation of a legally enforceable contract. The parties will be found to have reached a meeting of the minds where it is clear to the objective reasonable bystander, in light of all the material facts, the parties intended to contract and the essential terms of that contract can be determined with a reasonable degree of certainty: see e.g. Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co. (2003), 2003 ABCA 221, 17 Alta. L.R. (4th) 243 (Alta. C.A.).

[96] Determining the party with whom a carrier holds a contract, whether express or implied, is a question of fact: see Neptune.

ii. Was There an Express Contract for the Payment of Demurrage?

[97] Where a railway (in this case, CN) undertakes to carry goods to a point beyond the terminus of its own lines, the railway is prima facie liable for damage or loss happening not only on its own lines but also for loss or damage happening after the goods have been transferred to other railway over whose line the transit has to be completed. The other railway (in this case, GEXR) is merely an agent of the first railway, and there is no privity of contract between the shipper and the other railway: Grand Trunk Railway v. McMillian (1889), 16 S.C.R. 543, at pp. 549-50 (S.C.C.).

[98] In some circumstances, there can be privity of contract between a consignee and a carrier other than the originating carrier. Whether there is such a relationship or not depends upon the factual circumstances of each case. For example, if the bill of lading expressly named the consignee and the delivering carrier, the wording in the bill of lading could make the delivering carrier a party to the contract of carriage: see Direct Winters Transport Ltd. v. Duplate Canada Ltd., [1962] O.R. 560 (H.C.). As another example, if the goods are sent on a “collect” basis, it is an accepted custom that the destination carrier is also a party to the contract for freight charges: see Norfolk and Western Railway Co. v. Great Lakes Brick & Stone Ltd. (1995), 19 B.L.R. (2d) 285 (Ont. Ct. J. (Gen. Div.).

[99] In this case, there was a contract of carriage between P&H and CN for the movement of P&H’s traffic from Western Canada to Breslau. At all times, P&H ordered railcars from CN and paid CN for the movement of railcars carrying its product from Western Canada to Breslau. CN continued to be the carrier shown in rates across the Guelph Line. The shipping documents all stated that CN was moving P&H product from Western Canada origins to Breslau and that P&H prepaid CN for the movement of these railcars.

[100] CN set the line haul rates. GEXR leased the line from CN and operated their own railway on CN track. GEXR hauled CN traffic along the leased portion of the line and was paid a portion of the freight rate as a haulage fee. The shipping documents only mentioned GEXR when describing the routing of traffic onto the GEXR Line.

[101] By contrast, P&H does have a clear, direct commercial relationship with GEXR at Centralia, Goderich and Hensall, which are other GEXR locations within Ontario. P&H pays demurrage to GEXR at those locations.

[102] P&H made a credit application to GEXR at Centralia, in which P&H agreed to terms and conditions of the GEXR tariff, including accessorial charges. This application was made in relation to Centralia and not for the Guelph Line. In addition, the credit application was made well after Shantz Station began operating. I find that this credit application is not a contract or agreement to pay demurrage at Shantz Station.

[103] GEXR was not a party to a contract for the carriage of goods to Shantz Station. P&H did not pay freight charges to GEXR or receive bills of lading from GEXR for the goods that were shipped to Shantz Station. I find that there was no express contract between GEXR and P&H for the payment of demurrage.

[104] GEXR relies on the case of Canadian Pacific Railway Co. v. McCabe Grain Co. (1968), 69 D.L.R. (2d) 313 (B.C.C.A.), and submits that the case supports the proposition that the delivering carrier is the one to charge demurrage. However, this case is distinguishable because contractual privity was not in issue. The case dealt with narrow statutory interpretation of the Canadian Car Demurrage Rules, which is no longer good law.

iii. Was There an Implied Contract for the Payment of Demurrage?

[105] The parties did not have an express agreement regarding demurrage. In these circumstances, the court must examine what occurred between the parties to determine whether there was an implied contract.

[106] The difference between an express and implied contract is the way in which the consent of the parties is manifested. Contracts are implied when their terms are not stated in words, for example, when passengers board a bus. In the conduct of the parties, the law implies a promise by the passenger to pay the fare; and the promise by the bus operator to carry the passenger safely to his destination. Express and implied contracts are both contracts in the true sense of the term because they both arise from the agreement of the parties: see A.G. Guest, ed., Chitty on Contracts, 27th ed., vol. 1 (London: Sweet & Maxwell Ltd., 1994).

[107] To find that an implied contract exists, the court must be satisfied that the parties have agreed to the essential terms of the contract. Courts are generally reluctant to find that an implied contract exists between parties as there must be certainty and agreement upon the essential terms of the contract.

[108] An implied contract is inferred by law, as a matter of reason and justice from the conduct and the circumstances surrounding the transaction. An implied contract is one inferred from the conduct of parties and arises where the plaintiff, without being requested to do so, renders services under circumstances indicating that he expects to be paid therefor; and the defendant, knowing such circumstances, avails himself of the benefit of those services. It is an agreement which legitimately can be inferred from the intention of the parties as evidenced by the circumstances, ordinary course of dealing and common understanding: Smith v. Harbour Authority of Port Hood (1993), 123 N.S.R. (2d) 225, at p. 229 (S.C.).

[109] In this case, GEXR relies on a custom of the railroad industry that permits railroads to charge demurrage, which can be described as follows: the railroad gives the shipper the right to use the line, which carries with it an assumption that the shipper will pay demurrage; the railroad issues a tariff that establishes the rate of demurrage; the obligation is assumed by the parties to exist, and the expectation is created as a result. Essentially, GEXR says that this custom gives rise to an implied contract, the terms of which are supplied by the custom of the trade.

[110] In Steamship “Country of Lancaster,” Limited v. Sharp & Co., the court held that an implied contract will not arise if the consignee refuses to pay demurrage before taking delivery of goods from the carrier. In that case, the defendants accepted delivery on the express understanding that they agreed to pay the freight but not demurrage. Essentially, they repudiated the implied contract before the delivery. This was distinguished from a previous case, where the defendant first took delivery but only then purported to repudiate his liability to pay demurrage. In that case, the defendant was ordered to pay demurrage.

[111] In the case of Railink Canada Ltd. v. Federal Marine Terminals, 2009 CarswellOnt 1864 (S.C.), the court held that the defendant should be liable for demurrage charges. In that case, the court held “whether there is a paper contract or not, there is clearly a common understanding between these two parties.” That is distinguishable from the case at bar, where there is no common understanding. P&H categorically rejected the existence of any contract at all relevant times since before the first demurrage invoice was issued. There was no meeting of the minds.

[112] P&H has consistently and unequivocally refused to accept or pay GEXR demurrage charges at Shantz Station. From the time that the Shantz Station terminal opened, P&H took the position that it had an agreement with CN and that GEXR could not bill for demurrage at Shantz Station. GEXR initially accepted this position and did not bill demurrage for long periods of time. Despite knowing that P&H refused to accept these demurrage charges, GEXR continued to provide services and deliver rail cars to Shantz Station Terminal.

[113] When P&H received invoices for demurrage from GEXR, it rejected such billing. This position did not change. While P&H acknowledged that it was liable to pay demurrage, it always maintained the position that it would only pay demurrage to CN and based on the CN Tariff 9000. When CN billed P&H for demurrage, P&H recalculated the amount owing in accordance with CN Tariff 9000 and paid a portion of the amount invoiced.

[114] If there is a custom of the trade that requires a shipper to pay demurrage at destination, P&H explicitly rejected this custom from the time that Shantz Station Terminal began its operations. GEXR continued to perform despite the rejection. In those circumstances, GEXR could not have a legitimate expectation or belief that they had a contract with the defendants, or that it would be paid.

[115] I am not satisfied that there was an implied contract or commercial understanding that would give rise to the right to charge demurrage. There cannot be an implied contract when there is a clear, express intention to the contrary.

[116] The facts in this case do not give rise to an implied contract for payment of demurrage. P&H’s repeated denials of any liability for demurrage, together with the long periods of time in which GEXR did not bill for demurrage (and appeared to accept P&H’s position), preclude a finding of an implied contract between the parties.

C. Has P&H Been Unjustly Enriched at GEXR’s Expense?

[117] Broadly speaking, the doctrine of unjust enrichment applies when a defendant receives a benefit from a plaintiff in circumstances where it would be “against all conscience” for the defendant to retain that benefit. Where this is found to be the case, the defendant will be obliged to restore that benefit to the plaintiff: see Moore v. Sweet, 2018 SCC 52.

[118] GEXR will succeed in its claim for unjust enrichment if it can show:

a) That the defendants were enriched; b) That the plaintiff suffered a corresponding deprivation; and c) That the defendants’ enrichment and the plaintiff’s corresponding deprivation occurred in the absence of a juristic reason.

See Moore v. Sweet.

[119] Prior to trial, GEXR articulated the unjust enrichment claim based on the fact that demurrage had been invoiced and had not been paid. Counsel stated that the defendants have been unjustly enriched by withholding the sum that had been invoiced; and the plaintiff had been deprived of those sums and unable to receive those sums into income.

[120] I do not accept that the loss of the use of the money constitutes unjust enrichment. If that were the case, every plaintiff in every case could make an unjust enrichment claim.

[121] I will now turn to a consideration of each of the three questions as set out in the principled unjust enrichment framework:

i. Were the Defendants Enriched?

[122] The defendants have not been unjustly enriched because they have always maintained the position that they have at all times been liable for CN demurrage charges and remain so. They are willing to pay (and have paid) charges for demurrage that CN rendered in accordance with the MOU and CN Tariff 9000.

ii. Did GEXR Suffer a Corresponding Deprivation?

[123] In closing submissions, GEXR submitted that it suffered a lost opportunity cost when rail cars were not circulated into service for renewed haulage opportunities. GEXR states that any car held by the defendants past the free time has an impact on the velocity of the car cycle, which has an impact on revenue to railroads across Canada.

[124] However, no evidence was led to support the claim that there was a shortage of railcars during periods when the defendants kept cars past the free time. In particular, GEXR did not lead evidence that it lost the opportunity to earn revenue because the cars were not in circulation.

[125] Arguably, the defendants’ overholding of the rail cars past the free time may have resulted in an enrichment to the defendants. However, I have no evidence of any tangible, corresponding deprivation to GEXR. While there is some evidence that the occupied rail cars may prevent additional loads from being moved across the rail line in busy times when there is a shortfall of empty rail cars, I do not have any evidence of shippers being turned away that would otherwise have been using GEXR rail lines.

[126] Counsel also submitted that GEXR incurred additional car hire charges for the extra days that P&H held the cars past the free time. However, GEXR refused to disclose its car hire reclaim agreement with CN. This disclosure is critical to an understanding of any cost that GEXR incurred when P&H kept the railcars past the free days. If CN compensated GEXR fully for car hire charges in this situation, then GEXR would suffer no deprivation from the overholding of rail cars. It is impossible to quantify the deprivation, if there was any.

[127] GEXR has failed to provide any evidence regarding car hire charges that it paid because of unloading delays at Shantz Station. In addition, it has failed to provide any evidence of the value of the car hire reclaim amount that GEXR received from CN.

[128] I find that there has been no deprivation of GEXR. It did not attempt to enforce its claim for demurrage until 2012. It could have, and still can, request that CN bill the defendants for demurrage and receive the funds from CN. If CN will not do that, any resulting deprivation suffered by GEXR is as a result of its relationship with CN and is not related to any enrichment of the defendants.

iii. Did the Defendants’ Enrichment and the Plaintiff’s Corresponding Deprivation Occur in the Absence of a Juristic Reason?

[129] Since GEXR has not established any enrichment of the defendants nor a corresponding deprivation of GEXR, there is no need to consider the third question.

V. CONCLUSION

[130] For all of these reasons, the action is dismissed.

VI. COSTS

[131] In the event that the parties cannot agree as to costs, they are directed to provide written submissions. The submissions shall be no longer than two typed pages, double-spaced, in addition to any relevant Bill of Costs and written Offers to Settle. The defendants shall provide costs submissions by June 21, 2019; and the plaintiff shall provide any response by June 28, 2019. In the event that submissions are not received from either party by June 28, 2019, costs shall be deemed settled.

Braid, J. Released: May 31, 2019