Transport Committee on Feb. 12th, 2013

[Denis Lebel, Conservative, Roberval—Lac-Saint-Jean, QC]

For sure, as I have said, these contracts were signed in a good partnership by both parties at the time. But the information we have is that most of these contracts are for only one or two years, and most will end very soon, I think. At that time, it will be easier for them. But we're doing all that to have contracts. What doesn't respect the ones that are already signed?

[The Chair, Conservative, Larry Miller]

You're out of time, Mr. Goodale.

We now move to Mr. Poilievre for seven minutes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Thank you.

On the question of the awards, this could go either to the minister or to the legal analysts. If the CTA were to predetermine a fine to be awarded to the shipper, what would that do to the shipper's subsequent right to seek damages in court?

[Alain Langlois]

Normally when you have such a clause in a contract, it's interpreted by a court as being a surrogate for the actual damages the court would normally allow to be paid if you were to go to court. It's normally viewed as an agreement to the party of the amount that will become payable if there's a breach. It's a contractual agreement. You don't go to court. You have an amount that's specified in a contract, and that's the amount that's payable, regardless of what are the actual damages suffered by the one party.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

If, in a hypothetical case, the shipper had damages that were larger than the award previously assigned by the CTA, then they would not be able to pursue those additional damages in the court. It would actually fall behind as a result of a prescribed award.

[Alain Langlois]

That's correct. That's why it's difficult to envision that an arbitrator would actually impose these kinds of damages in the absence of an agreement between the parties. It almost has to be an agreement between the parties. It's an abdication of the party's right to go to court for actual damages. In order to have that consequence on a party, you want the party to agree, as opposed to having an arbitrator impose these types of amounts.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

So under that hypothetical proposal, the arbitrator would be abdicating the shipper's right to go to court for damages in the event of some breach of contract.

[Alain Langlois]

That's correct.

One of the dangers, and one of the legal hurdles or problems, is that normally these types of damages are set at an amount that tries to replicate what the actual damages will be, but—

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

They don't know.

[Alain Langlois]

—the danger in having an amount that could be established at a very high level is that the penalty in a commercial contract is unenforceable. If the amount is too high, the courts will not enforce the amount because they will deem this amount a penalty. If the amount is too low, then it has the effect that you just described: it affects a shipper's ability to seek the actual damage amount.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

So a proposal to provide shippers with awards from the proceeds of a fine could actually take away the legal rights of the shipper and/or shortchange that shipper of amounts that he or she might otherwise be entitled to in a breach of contract case.

[Alain Langlois]

Correct.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Okay. I presume it would be hurting the people we'd be trying to help.

[Alan Langlois]

Yes.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

For clarity's sake, the administrative monetary penalty that this legislation envisions does not take away the shipper's ability to pursue damages for breach of contract in court.

[Alain Langlois]

Correct.

It's a government enforcement tool on an order that's been imposed, in this case, it's an SLA , that is above and beyond the right of a shipper to recover damage in court, if they want to do that.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

So an administrative monetary penalty is punitive, but damages from a court are compensatory.

[Alain Langlois]

Right.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

The two are not mutually exclusive.

[Alain Langlois]

Correct.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

In other words, this bill adds a monetary penalty but does not take away the shipper's right to secure damages.

[Alain Langlois]

Correct.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Okay.

Shippers have indicated they want greater clarity and predictability on rail freight service.

Will service agreements help you achieve this outcome?

[Denis Lebel, Conservative, Roberval—Lac-Saint-Jean, QC]

That's what they wanted. They will probably ask for some amendments—we will see—but they did agree with that. That gave them the predictability and the tools they need to have these agreements and to plan for the future.

To invest money in a country, you need to have some tools to show companies around the world that you can deliver what they are asking for, and that's what we are doing now.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Minister, shippers indicated throughout the process leading to the tabling of the bill that they wanted three fundamental elements in this bill: the right to a service level agreement; a process to get a service agreement, if one cannot be commercially negotiated; and financial consequences on the railways for non-performance.

Does this bill deliver one of these elements or all of them?