Executive Summary: Key Legal and Evidentiary Issues

• Judicial review focused on whether the Transportation Appeal Tribunal of Canada (TATC) Appeal Panel properly applied the reasonableness standard in upholding a regulatory penalty.

• The sufficiency and specificity of Canadian National Railway Company’s (CN) due diligence defence for strict liability regulatory offences was closely examined.

• Compliance with section 17.2 of the Railway Safety Act and Rule 439 of the Canadian Rail Operating Rules formed the statutory basis of the violations.

• The adequacy of CN’s safety management systems and its response to heightened operational risks were scrutinized in light of the incidents.

• The distinction between reasonableness and correctness as standards of review was debated in the context of administrative law.

• The outcome depended on whether CN demonstrated it took all reasonable steps to prevent the violations, with the court ultimately finding against CN.

Facts of the case

In August 2019, Transport Canada issued a Notice of Violation to Canadian National Railway Company (CN) following two separate incidents in Alberta where CN trains failed to stop at STOP signals near Edmonton. These events occurred on October 25, 2018, and November 9, 2018. The Notice cited violations of Rule 439 of the Canadian Rail Operating Rules and section 17.2 of the Railway Safety Act, and imposed a monetary penalty of $58,666.08 on CN.

Policy terms and statutory framework

The case centered on section 17.2 of the Railway Safety Act, which prohibits railway companies from operating in contravention of operating certificates, regulations, and rules. Rule 439 of the Canadian Rail Operating Rules requires trains to stop at STOP signals unless certain exceptions apply. The legal framework also included section 40.13(1) of the Railway Safety Act, which governs administrative monetary penalties for such violations. A key legal issue was the due diligence defence for strict liability offences, where the company must prove it took all reasonable steps to prevent the prohibited act.

Procedural history and tribunal decisions

CN applied for a review of the Notice before the Transportation Appeal Tribunal of Canada (TATC), arguing that it had exercised all reasonable care and that the violations were due to human error rather than systemic failures. The TATC Review Decision, dated May 24, 2022, agreed with CN, finding that the company had established a proper system to prevent such violations and that the incidents were attributable to employee error, not deficiencies in CN’s system.

The Minister of Transport appealed the TATC Review Decision to a three-member appeal panel of the TATC. On March 5, 2024, the appeal panel allowed the appeal, rescinded the Review Decision, and upheld the Notice of Violation and the penalty. The panel found that the Review Decision was unreasonable, particularly because it failed to analyze whether CN had exercised due diligence in light of heightened operational risks at the time of the incidents, such as staff shortages and increased risk factors in the Edmonton area. The panel concluded that CN had not demonstrated it took all reasonable steps to prevent the violations, emphasizing that heightened risks required heightened precautions and that CN’s evidence did not adequately address the specific risks present during the incidents.

Judicial review and legal analysis

CN sought judicial review of the Appeal Decision, arguing that the appeal panel had applied the wrong standard of review and failed to properly articulate the standard of care required for due diligence. The Federal Court, presided over by Justice Andrew D. Little, held that the standard of review was reasonableness and that the appeal panel had properly applied this standard. The court found that the panel’s analysis was consistent with established legal principles regarding due diligence in regulatory offences and that the panel was justified in finding that CN had not met its burden. The court also addressed arguments about whether the panel had imposed a standard of perfection rather than reasonableness, ultimately finding that the panel had not done so. The decision reaffirmed that the due diligence defence requires evidence of specific, reasonable steps taken to address the particular risks at issue, not just general compliance systems.

Ruling and outcome

The Federal Court dismissed CN’s application for judicial review, upholding the TATC Appeal Decision and the administrative monetary penalty. The court ordered CN to pay costs to the Attorney General of Canada in the amount of $4,000, as agreed by the parties. The successful party in this matter was the Attorney General of Canada, with the penalty and costs confirmed against CN. No other specific monetary award was determined beyond the fixed costs.