A-844-76
Saskatchewan Power Corporation and Many
Islands Pipe Lines Limited (Appellants)
v.
TransCanada PipeLines Limited (Respondent)
and
Attorney General of Canada (Intervener)
Court of Appeal, Pratte, Urie and Le Dain JJ.—
Ottawa, December 7 and 8, 1976 and February
23, 1977.
Crown — Appeal from decision of National Energy Board
—Az/tether certain documents required to be filed with Board
by respondent under s. 51(2) of National Energy Board Act
Whether contract of sale or contract of exchange — Whether s.
51(2) applicable — Whether s. 51(2) ultra vires Parliament of
Canada — National Energy Board Act, R.S.C. 1970, c. N-6,
ss. 2, 11(b), 18, 50, 51(2) and 61 — The British North America
Act, 1867, ss. 92(10)(a) and 91(29).
Appellants claim that the National Energy Board was wrong
in deciding that certain documents relating to a contract be
tween them and the respondent were required to be filed with
the Board by section 51(2) of the National Energy Board Act.
The appellants argue that acceptance of the documents by the
Board was an assertion of its power to regulate the price of gas
under a 1969 contract and that the documents did not have to
be filed because they were evidence not of a contract of sale,
but of a contract of exchange. Appellants further argued in
Court that the documents did not have to be filed because the
contract was entered into before the enactment of section
51(2); the contract does not specify that the gas sold is to be
conveyed by pipeline; and section 51(2) is ultra vires the
Parliament of Canada in that it is part of a scheme to regulate
intraprovincial as well as interprovincial operations and to
regulate not only the costs of the interprovincial undertaking,
but also the conditions of intraprovincial contracts.
Held, the appeal is dismissed. Although the 1969 contract
was not a contract of sale but a promise to sell, and would not
have had to be filed if section 51(2) had been in force at the
time, a new contract came into being when the appellants
notified the respondent of their decision to take up the sale and
the new contract was a contract of sale. Section 51(2) therefore
applies and does so when the commodity sold is in fact trans
mitted by pipeline, whether or not the contract specifies such a
method of transmission. Section 51(2) is not ultra vires the
Parliament of Canada because federal jurisdiction to regulate
interprovincial undertakings includes the power to regulate tolls
and extends to all services provided including intraprovincial
ones. Further, the power to regulate tolls includes the power to
enact provisions necessary to prevent the circumvention of such
regulations, which is the purpose of section 51(2).
The Queen in the Right of Ontario v. Board of Transport
Commissioners [1968] S.C.R. 118; Canadian Pacific
Railway Company v. Canadian Oil Companies Ltd.
(1913) 47 S.C.R. 155, affirmed by [1914] A.C. 1022; The
Crow's Nest Pass Coal Company Limited v. Alberta
Natural Gas Company [1963] S.C.R. 257; Campbell-
Bennett Ltd. v. Comstock Midwestern Ltd. [1954] S.C.R.
207 and Attorney-General for Ontario v. Winner [1954]
A.C. 541, applied. Prenn v. Simmonds [1971] 3 All E.R.
237, distinguished.
APPEAL from National Energy Board decision.
COUNSEL:
Gordon F. Henderson, Q. C., Y. A. George
Hynna and Maurice Sychuk for appellants.
John H. Francis, Q. C., and G. D. Finlayson,
Q.C., for TransCanada PipeLines.
Philip G. Griffin for National Energy Board.
T. B. Smith, Q.C., for Attorney General of
Canada.
SOLICITORS:
Gowling & Henderson, Ottawa, for
appellants.
McCarthy & McCarthy, Toronto, for Trans-
Canada PipeLines.
National Energy Board on its own behalf.
Deputy Attorney General of Canada for
Attorney General of Canada.
The following are the reasons for judgment
rendered in English by
PRATTE J.: This is an appeal from a decision of
the National Energy Board finding that certain
documents that TransCanada PipeLines Limited
had filed with the Board were documents that
were required to be filed under section 51(2) of the
National Energy Board Act'.
TransCanada PipeLines Limited is a company
within the meaning of section 2 of the National
' R.S.C. 1970, c. N-6.
Energy Board Act which owns and operates an
interprovincial pipeline. 2 On November 1, 1969, it
entered into a long-term gas supply contract with
the appellants. The contract was made for a period
of twelve years, ending October 31, 1981. It pro
vided that during each one of the first six years,
TransCanada would purchase certain volumes of
gas from the appellants; it also provided that
during each one of the last six years, the appellants
would be entitled, at their option, to purchase
comparable volumes of gas from TransCanada.
After the expiry of the first six years, the appel
lants sent written notices to TransCanada indicat
ing the volumes of gas that they had decided to
buy during the years commencing on November 1,
1975, and November 1, 1976. TransCanada for
warded to the Board copies of those notices and of
the 1969 contract. Those documents were sent for
filing pursuant to section 51(2) of the National
Energy Board Act. 3 The appellants apparently felt
that the acceptance of those documents for filing
constituted a tacit assertion by the Board of its
power to regulate the price at which TransCanada
had agreed to sell its gas under the 1969 contract.
They applied to the Board for an order "refusing
the purported filing or directing that the question
of the validity of the proposed filing by Trans-
Canada PipeLines Limited of the Gas Purchase
Contract dated November 1, 1969, between Sas-
katchewan Power Corporation as Seller and
TransCanada PipeLines Limited as Buyer, be
determined by the National Energy Board at a
special hearing of the Board."
2 Section 2 of that Act reads in part as follows:
2. In this Act
"company" means a person having authority under a Special
Act to construct or operate pipelines;
"pipeline" means a line for the transmission of gas or oil
connecting a province with any other or others of the
provinces, or extending beyond the limits of a province,
and includes all branches, extensions, tanks, reservoirs,
storage facilities, pumps, racks, compressors, loading
facilities, interstation systems of communication by tele
phone, telegraph or radio, and real and personal property
and works connected therewith;
3 That section is contained in Part IV of the Act which reads
in part as follows:
PART IV
TRAFFIC, TOLLS AND TARIFFS
A hearing was thereafter held at which counse.
for the appellants argued that the documents ten
dered for filing by TransCanada had not to be
filed under section 51(2) because they were evi
dence, he said, not of a contract made by Trans-
Canada for the sale of gas but, rather, of a con
tract of exchange.
The Board dismissed the appellants' contention
and held that, under section 51(2), TransCanada
was obliged to file the documents that it had sent
to the Board.
Counsel for the appellants reiterated before this
Court the submission that had been made before
the Board and, in addition, argued that the docu-
50. The Board may make orders with respect to all mat
ters relating to traffic, tolls or tariffs.
51. (1) A company shall not charge any tolls except tolls
specified in a tariff that has been filed with the Board and is
in effect.
(2) Where the gas transmitted by a company through its
pipeline is the property of the company, the company shall
file with the Board, upon the making thereof, true copies of
all the contracts it may make for the sale of gas and
amendments from time to time made thereto, and the true
copies so filed shall be deemed, for the purpose of this Part,
to constitute a tariff pursuant to subsection (1).
52. All tolls shall be just and reasonable and shall always,
under substantially similar circumstances and conditions
with respect to all traffic of the same description carried over
the same route, be charged equally to all persons at the same
rate.
53. The Board may disallow any tariff or any portion
thereof that it considers to be contrary to any of the provi
sions of this Act or to any order of the Board, and may
require a company, within a prescribed time, to substitute a
tariff satisfactory to the Board in lieu thereof, or may
prescribe other tariffs in lieu of the tariff or portion thereof
so disallowed.
54. The Board may suspend any tariff or any portion
thereof before or after the tariff goes into effect.
61. Where the gas transmitted by a company through its
pipeline is the property of the company, the differential
between the cost to the company of the gas at the point
where it enters its pipeline and the amount for which the gas
is sold by the company shall, for the purposes of this Part, be
deemed to be a toll charged by the company to the purchaser
for the transmission thereof.
Those sections must be read in the light of the definition of the
word "toll" found in section 2:
"toll" includes any toll, rate, charge or allowance charged or
made for the shipment, transportation, transmission, care,
handling or delivery of hydrocarbons, or for storage or
demurrage or the like.
ments were not required to be filed under section
51(2) for the following reasons:
(a) the contract of 1969 was entered into before
the enactment of section 51(2) in 1970;
(b) the contract entered into by the parties does
not contemplate that the gas to be acquired by
the appellants will be gas transmitted in a
pipeline;
(c) section 51(2) is ultra vires of the Parliament
of Canada.
In my view, the Board was correct in finding,
contrary to the appellants' submission, that the
documents tendered by TransCanada were evi
dence of a contract for the sale of gas by Trans-
Canada to the appellants. The contract of 1969
provided
(a) for a sale of gas, during the first six years of
the contract, by the appellants to TransCanada;
and
(b) for a promise of sale by TransCanada to the
appellants, during the last six years of the
contract.
The 1969 contract, in itself, was not a sale which,
had section 51(2) been in force in that year, would
have been required to be filed under that section.
But, when the appellants, in 1975, notified Trans-
Canada of their decision to take advantage of the
promise of sale, then a new contract came into
being and that contract, in my view, cannot be
characterized as anything but a sale of gas by
TransCanada to the appellants.
It follows that the contracts made by Trans-
Canada for the sale of its gas were not entered into
in 1969 but in 1975 when the appellants notified
TransCanada of their decision to exercise their
option. Section 51(2) was enacted in 1970. There
is, therefore, no merit in the submission made on
behalf of the appellants that the decision under
appeal has given a retroactive effect to section
51(2).
I cannot find any merit, either, in the submis
sion that the sale to the appellants did not fall
within section 51(2) because the documents ten
dered for filing did not expressly indicate that the
gas sold to the appellants was gas that would be
transmitted through the pipeline of TransCanada.
Section 51(2) applies every time a gas company
sells gas which, in fact, is transmitted in its pipe
line. It is not necessary, for the section to apply,
that the origin of the gas be specified in the
contract.
According to the appellants' counsel, as I under
stood him, section 51(2) would be ultra vires of
the Parliament of Canada for two reasons: first,
because that provision would be part of a scheme
to regulate rates of purely intraprovincial as well
as interprovincial operations and, second, because
it would be part of a scheme to regulate, not only
the cost of services to be provided by an interpro-
vincial undertaking, but also the conditions of
purely intraprovincial contracts for the sale of gas.
Both these arguments, in my view, must be reject
ed. First, it is now well established that the federal
jurisdiction over an interprovincial undertaking
includes the power to regulate tolls and extends to
all the services provided by the undertaking,
including those that are provided entirely within
the limits of a province (The Queen in the Right of
Ontario v. Board of Transport Commissioners
[1968] S.C.R. 118). Second, once it is realized
that what is here in issue is the validity of section
51(2) alone and not of section 61, it becomes
apparent, in my view, that the power of Parliament
to regulate tolls of federal undertakings includes
the power to enact a provision such as section
51(2) which seems necessary to prevent the cir
cumvention of the toll regulation.
For these reasons, I would dismiss the appeal.
* * *
URIE J.: I concur.
* * *
The following are the reasons for judgment
rendered in English by
LE DAIN J.: This is an appeal, pursuant to
section 18 of the National Energy Board Act,
R.S.C. 1970, c. N-6, from a decision of the Na
tional Energy Board declaring that a "Gas Pur
chase Contract" dated November 1, 1969, between
the appellants Saskatchewan Power Corporation
and Many Islands Pipe Lines Limited (hereinafter
referred to collectively as "SPC") and the
respondent TransCanada PipeLines Limited (here-
inafter referred to as "TransCanada") is one
which TransCanada was required by the terms of
section 51(2) of the Act to file with the Board, and
that it was validly filed pursuant to that section.
The contract, which is between SPC as "Seller"
and TransCanada as "Buyer", contains the follow
ing recitals:
WHEREAS Seller and Buyer have entered into a gas purchase
contract dated May 1, 1959, as amended (hereinafter called
"the original Contract") with respect to the sale and purchase
of gas produced from the Medicine Hat Field in the Province of
Alberta and delivered at Success, Saskatchewan;
AND WHEREAS Seller has interests in additional gas in the
Medicine Hat Field in the Province of Alberta, and Seller will
have a supply of gas available therefrom and desires to sell such
gas to Buyer;
AND WHEREAS, subject to the provisions of this Contract,
Buyer desires to purchase such gas from Seller;
AND WHEREAS subject to the terms and conditions herein
contained Seller desires the right after November 1, 1974 to
purchase certain volumes of gas.
The contract provides for the sale by SPC to
TransCanada of certain minimum and maximum
daily quantities of gas (defined as "natural and/or
residue gas") at stipulated prices during each of
the contract years in the period November 1, 1969
to October 31, 1974. From November 1, 1974 to
October 31, 1981 SPC is to have the right to
obtain "redelivery" of gas from TransCanada, as
provided in Article XVII of the contract as
follows:
ARTICLE XVII—REDELIVERY OF GAS BY BUYER
1. Seller shall have the right during the period commencing
November 1, 1974 and ending October 31, 1981 to purchase
and Buyer shall sell and redeliver to Seller volumes of gas as
requested by Seller up to the total volumes of gas purchased by
Buyer during the period commencing November 1, 1969 and
ending November 1, 1974; provided that
(i) Seller shall give Buyer not less than eighteen (18) months
written notice of Seller's nomination for gas for each contract
year, and
(ii) Seller may only nominate to have redelivered to Seller a
volume up to 16,000,000 Mcf during any contract year, and
(iii) Upon such nomination being made by Seller hereunder
Seller shall then be obligated to take and pay for, or never
theless to pay for if available and not taken, the quantities of
gas that Seller has so nominated to be redelivered to Seller
by Buyer, and
(iv) Buyer's obligation to redeliver each day shall be up to a
daily quantity calculated by dividing the annual volume
nominated hereunder by Seller for the contract year by 365
and multiplying the quotient so obtained by 1.33, and
(v) The point of delivery for such redelivery of gas by Buyer
to Seller shall be at the existing point of delivery near
Success, Saskatchewan, as provided in the original Contract
and at the pressure existing in Buyer's pipe line at the time of
such redelivery, and
(vi) The price to be paid by Seller to Buyer for all such gas
to be redelivered hereunder shall be 23.500 per Mcf and if
the weighted average BTU content of the gas redelivered in
any month is less than 1,000 BTUs per cubic foot the price of
the gas shall be decreased in direct proportion to the decrease
in the BTU content of such gas from 1,000 BTUs per cubic
foot.
Article VIII of the contract of May 1, 1959
(referred to as the "original Contract"), which is
to apply mutatis mutandis to the contract of
November 1, 1969, makes the following provision
with respect to delivery:
ARTICLE VIII-DELIVERY PRESSURE AND POINT OF DELIVERY
1. The delivery pressure of the gas delivered hereunder shall
be such pressure as shall be necessary to effect delivery thereof
into the Buyer's main transmission pipe line.
2. The point of delivery of all gas delivered hereunder shall
be at Buyer's main transmission pipe line in the Province of
Saskatchewan, at a point to be agreed upon in writing between
the parties hereto.
3. Possession of and title to all gas delivered hereunder shall
pass from Seller to Buyer at the point where such gas leaves
Seller's facilities and enters Buyer's facilities at said point of
delivery. Until such delivery, Seller shall be deemed to be in
control or possession of, have title to, and be responsible for
such gas, and after such delivery Buyer shall be deemed to be in
control or possession of, have title to, and be responsible for
such gas.
By an agreement dated October 22, 1962 be
tween SPC and TransCanada the point of delivery
under the contract of May 1, 1959 is further
defined as follows:
The parties hereto covenant and agree that notwithstanding
anything contained in the said Contract, the point of delivery
for all gas delivered under the said Contract shall be at the
point where such gas enters Buyer's facilities near the intersec
tion of Buyer's thirty-four (34) inch pipe line and Seller's ten
(10) inch pipe line in Section 26, Township 18, Range 16, West
of the 3rd Meridian in the Province of Saskatchewan. All gas
delivered under the said Contract at the point of delivery shall
be measured and tested at the meter station located in the W/2
of Section 26, Township 18, Range 16, East of the 3rd Meridi
an in the Province of Saskatchewan.
By agreement dated October 5, 1973 the con
tract of November 1, 1969 was amended to pro
vide that "Seller's right, pursuant to Article XVII
of said Contract, to request redelivery of gas shall
commence on April 1, 1975".•
By telex and letter dated April 30, 1974 SPC
advised TransCanada that it nominated 5,000,000
Mcf of gas for redelivery during the contract year
commencing November 1, 1975, as provided in
Article XVII of the contract, and by letter dated
March 27, 1975 SPC nominated 16,000,000 Mcf
of gas for redelivery during the contract year
commencing November 1, 1976.
On July 11, 1975 TransCanada filed with the
Board copies of the contract of November 1, 1969,
as amended, as well as copies of the notices of
nomination by SPC pursuant to Article XVII. The
letter accompanying the material to be filed
stated:
Pursuant to Section 52(2) [sic] of the National Energy
Board Act we enclose herewith six (6) copies of a contract
entered into between Saskatchewan Power Corporation, Many
Islands Pipe Lines Limited and TransCanada PipeLines Lim
ited dated 1 November, 1969 and amendments thereto, to
gether with a copy of a Notice sent by Saskatchewan Power
Corporation to TransCanada pursuant to Section 17 of the said
contract whereby Saskatchewan Power has elected to
purchase 5 billion cubic feet of natural gas during the contract
year commencing November 1, 1975 as well as a further Notice
whereby Saskatchewan Power has elected to purchase 16 Bcf of
natural gas during the contract year commencing November 1,
1976.
On July 15, 1975 TransCanada filed a revised
application to the Board for "just and reasonable
rates and tolls in respect of Canadian gas sales and
transportation services to be effective November 1,
1975," and requested the following orders from
the Board:
A. An Order effective November 1, 1975 disallowing any
existing rates or tolls currently in effect or which would other
wise come into effect on November 1, 1975 for or in respect of
gas sold and for gas transported for others by the Applicant in
Canada, and approving new rates or tolls proposed to be
charged by the Applicant for such services as set forth in this
revised and updated application.
B. An Order approving the tariff provisions filed with this
application and disallowing any provisions existing in the
present Tariff or in contracts for the various services under
consideration in the present application which are inconsistent
with the tariff provisions so approved.
The revised application of July 15, 1975 con
tained the following submission with respect to the
contract of November 1, 1969:
Pursuant to a contract dated November 1, 1969 as amended,
SPC has the right during the period commencing November 1,
1975 and ending October 31, 1981 to purchase from Trans-
Canada volumes of gas in a quantity and in a manner which is
set out in the said contract which has been filed with the Board.
SPC has given the Applicant notice of its election to purchase
an annual quantity of 5 Bcf during the contract year November
1, 1975. The Applicant has included the said volumes of gas as
part of the test period sales and requests in the present applica
tion disallowance of the sales prices set out in the said contract
and substitution therefor of the Saskatchewan Zone CD-75
rate proposed in the present application.
By telex to the Board on July 23, 1975 SPC
expressed its opposition to the filing of the contract
with TransCanada as follows:
Saskatchewan Power Corporation objects to the filing of the
contract included as an attachment to the letter of July 11,
1975, from TransCanada PipeLines Limited to the National
Energy Board without there being a direct representation by
Saskatchewan Power Corporation as to the content and nature
of that agreement dated November 1, 1969, between Saskatch-
ewan Power Corporation and TransCanada PipeLines Limited.
The Board replied by telex on July 25, 1975 in
the following terms:
This contract was filed originally with the Board on April 15,
1971 in TransCanada's first rate application and has been
raised as an issue in TransCanada's submission dated July 15,
1975 in its current rate application.
Saskatchewan Power Corporation will have the opportunity to
present testimony or argument before the Board at the hearing
set down to recommence on 6 August 1975 by Order AO-1-
RH-2-75 dated 16 June, 1975.
A notice of motion dated August 6, 1975 was
filed by SPC in the rate hearing referred to above
as follows:
Take notice that Saskatchewan Power Corporation hereby
applies to the National Energy Board for an order refusing the
purported filing or directing that the question of the validity of
the proposed filing by TransCanada PipeLines Limited of the
Gas Purchase Contract dated November 1, 1969 between
Saskatchewan Power Corporation as Seller and TransCanada
PipeLines Limited as Buyer be determined as a question of law
by the National Energy Board at a special hearing of the
National Energy Board pursuant to section 12 of the Rules
Relating to Practice and Procedure in Proceedings before the
National Energy Board at a date to be determined by the
National Energy Board before the conclusion of the within
hearings.
And further take notice that this motion will be made upon
the grounds that:
(i) the contract is between a producer and a pipeline com
pany for an entire and indivisible consideration and is there
fore not subject to regulation under Part IV of the National
Energy Board Act;
(ii) in the alternative the jurisdiction of the National Energy
Board is a question of law which should be resolved in a
special hearing between TransCanada PipeLines Limited and
Saskatchewan Power Corporation in order to expedite the
within rate hearing.
By agreement dated August 6, 1975 SPC and
TransCanada made the following amendments
respecting redelivery under the contract of
November 1, 1969:
1. The said Contract is hereby amended by deleting the
figure "16,000,000" where the same appears in Article XVII,
Section 1, Subsection (ii) and substituting therefor the figure
"17,000,000".
2. Seller hereby cancels and withdraws its Notice dated
April 30, 1974 relating to the nomination of 5,000,000 Mcf of
gas for the contract year commencing November 1, 1975.
3. The Notice dated March 27, 1975 is hereby amended by
deleting therefrom the figure "16,000,000" and substituting
therefor the figure "17,000,000".
At the rate hearing on August 8, 1975, counsel
for SPC informed the Board that SPC desired a
determination of the question raised by its notice
of motion in a hearing separate and apart from the
rate hearing, and the Chairman of the Board said
that that was what the Board proposed to provide.
On August 22, 1975, SPC withdrew the notice of
motion that it had filed in the rate hearing and
made an application "pursuant to sections 50 and
51 of the National Energy Board Act" in the
following terms:
Saskatchewan Power Corporation hereby applies to the Na
tional Energy Board for an order refusing the purported filing
or directing that the question of the validity of the proposed
filing by TransCanada PipeLines Limited of the Gas Purchase
Contract dated November 1, 1969, between Saskatchewan
Power Corporation as Seller and TransCanada PipeLines Lim
ited as Buyer, be determined by the National Energy Board at
a special hearing of the Board;
And take notice that this application will be made upon the
grounds that the contract is between a producer and a pipeline
company for an inseparable consideration and is not a divisible
contract and it was the intention that an equitable charge on
reserves was created upon execution and upon request for
redelivery Sas%atchewan Power Corporation became the owner
in equity and the contract provided for an exchange over its
term and the contract is therefore not subject to regulations
under Part IV of the National Energy Board Act.
Following a hearing the Board rendered a deci
sion which was released on May 12, 1976. The
essential conclusions arrived at by the Board are
contained in the following passages from its
reasons:
... the Board finds that the 1 November 1969 contract is an
agreement whereby, in its initial phase, the Applicants sold gas
to TransCanada, and whereby in its latter phase, since the
option has been exercised, TransCanada will sell gas to the
Applicants.
... the Board finds that the 1 November 1969 contract is one
which TransCanada is obliged to file with the Board under the
provisions of section 51(2).
... the Board finds that the 1 November 1969 contract was
validly filed pursuant to section 51(2) of the Act.
The provisions of the National Energy Board
Act that are particularly relevant for purposes of
this appeal are sections 50, 51 and 61, which read
as follows:
50. The Board may make orders with respect to all matters
relating to traffic, tolls or tariffs.
51. (1) A company shall not charge any tolls except tolls
specified in a tariff that has been filed with the Board and is in
effect.
(2) Where the gas transmitted by a company through its
pipeline is the property of the company, the company shall file
with the Board, upon the making thereof, true copies of all the
contracts it may make for the sale of gas and amendments from
time to time made thereto, and the true copies so filed shall be
deemed, for the purposes of this Part, to constitute a tariff
pursuant to subsection (1).
61. Where the gas transmitted by a company through its
pipeline is the property of the company, the differential be
tween the cost to the company of the gas at the point where it
enters the pipeline and the amount for which the gas is sold by
the company shall, for the purposes of this Part, be deemed to
be a toll charged by the company to the purchaser for the
transmission thereof.
At the outset of the argument in this Court a
question was raised as to whether the Board was
empowered to make a binding decision of the kind
that was made in this case—that is, a decision of a
declaratory nature apparently made outside of, or
apart from, the regular exercise of its rate-making
jurisdiction. At the conclusion of the hearing ma
terial was added to the case to show the circum
stances in which the Board was called upon to
make its decision. I have set out those circum
stances in considerable detail to indicate the rela
tionship of the Board's decision to its powers under
the Act. They show that the Board's decision was
no mere advisory opinion or interpretative ruling
upon a matter not in controversy, but the determi
nation of an issue that was raised initially in rate
proceedings and was withdrawn from them to be
considered in a separate hearing. The terms of
section 11(b) 4 and section 50 of the Act, respect
ing the powers of the Board, are broad enough, in
my opinion, to include a binding determination,
outside of rate proceedings, of an issue as to
whether a particular contract must be filed with
the Board pursuant to section 51(2). The Board's
determination is sufficiently comprehended in the
power under section 11(b) to make "any order .. .
with respect to any ... act ... that by this Act .. .
is... required to be done" and the power under
section 50 to make orders with respect to "all
matters relating to traffic, tolls or tariffs." The
Board has chosen to call its determination a "deci-
sion" but I do not attach any significance, for the
purposes of this case, to such distinction as there
may be between the words "order" and "decision".
It would, moreover, in my opinion, be an unduly
restrictive and highly inconvenient interpretation
of the powers conferred by these provisions to
confine them to orders or decisions of a coercive or
prescriptive nature. 5 It seems to me to be an
essential aspect of the Board's responsibility for
the regulation of tariffs to have the power to
determine, as a separate issue, whether section
51(2) applies to a particular contract so as to make
it, once it is filed, a tariff for purposes of the Act.
I turn to the grounds of appeal invoked by the
appellants.
The first contention of the appellants is that the
Board erred in law in applying what purported to
° 11. The Board has full and exclusive jurisdiction to inquire
into, hear and determine any matter
(b) where it appears to the Board that the circumstances
may require the Board, in the public interest, to make any
order or give any direction, leave, sanction or approval that
by law it is authorized to make or give, or with respect to any
matter, act or thing that by this Act or any such regulation,
certificate, licence, permit, order or direction is prohibited,
sanctioned or required to be done.
5 Any doubt that I might entertain on this question would be
dispelled by the suggestion in the decisions of the Supreme
Court of Canada that it is disposed to recognize the power of
regulatory bodies such as the Board to make orders or decisions
of a declaratory nature in appropriate cases. See, for example,
Canadian Pacific Railway Company v. Canadian Oil Compa
nies Limited (1913) 47 S.C.R. 155, affd by [1914] A.C. 1022,
in which it was expressly held that the Board had such power;
and The Crow's Nest Pass Coal Company Limited v. Alberta
Natural Gas Company [1963] S.C.R. 257, and The Queen v.
Board of Transport Commissioners [1968] S.C.R. 118, in
which this power was apparently not questioned.
be the principles applicable to the interpretation of
tariffs and in excluding consideration of the cir
cumstances surrounding the contract as an indica
tion of how it should be characterized. Reference
was made to the decision of the House of Lords in
Prenn v. Simmonds [1971] 3 All E.R. 237, in
which Lord Wilberforce said at pages 239-240:
In order for the agreement of 6th July 1960 to be under
stood, it must be placed in its context. The time has long passed
when agreements, even those under seal, were isolated from the
matrix of facts in which they were set and interpreted purely on
internal linguistic considerations. There is no need to appeal
here to any modern, anti-literal, tendencies, for Lord Black-
burn's well-known judgment in River Wear Comrs. v. Adamson
[(1877) 2 App Cas 743 at 763, [1874-80] All ER Rep 1 at 11]
provides ample warrant for a liberal approach. We must, as he
said, enquire beyond the language and see what the circum
stances were with reference to which the words were used, and
the object, appearing from those circumstances, which the
person using them had in view. Moreover, at any rate since
1859 (Macdonald v. Longbottom) [(1860) 1 E & E 977,
[1843-60] All ER Rep 1050] it has been clear enough that
evidence of mutually known facts may be admitted to identify
the meaning of a descriptive term.
Lord Wilberforce concluded, for purposes of
that case, as follows at page 241:
In my opinion, then, evidence of negotiations, or of the
parties' intentions, and a fortiori of Dr. Simmonds's intentions,
ought not to be received, and evidence should be restricted to
evidence of the factual background known to the parties at or
before the date of the contract, including evidence of the
"genesis" and objectively the "aim" of the transaction.
The evidence which the appellants sought to
have the Board consider in this case was referred
to by the Board in its reasons for decision as
follows:
On the basis of explaining the background to this contract and
the intention of SPC at the time it was entered into, the
Applicants requested the Board to consider the following facts.
SPC is a gas distributor in the Province of Saskatchewan. The
requirements of the potash industry in Saskatchewan for natu
ral gas proved difficult to forecast, and by 1969 it became
apparent that estimates of gas consumption by that industry
were high, and that SPC was receptive to proposals to supply
gas to TransCanada in the period 1969 to 1974, in exchange for
redeliveries in the 1975 to 1981 period, when SPC's forecast
loads would be sufficient to absorb the redelivered volumes of
gas. The effect of an exchange agreement was to allow SPC to
meet its gas supply objectives.
After stating "It is the Board's view that in
interpreting contracts for the purposes of section
51(2), the same principles should be applied as are
used in the interpretation of tariffs", the Board
quoted passages from certain decisions of the
Board of Transport Commissioners to the effect
that tariffs are to be strictly construed, according
to their language and not according to what their
framers may have intended to say, and concluded
as follows:
On the basis of these rulings as to the interpretation of tariffs
and the authorities cited by the parties to the application, the
Board considers that, in determining whether a contract is one
of sale within the meaning of section 51(2), the Board should
consider the contract itself plus any agreements which amend it
and notices given under it. The Board does not however consid
er it relevant to refer to evidence relating to the background of
the transaction, the intention of one of the parties at the time of
negotiation of the contract, or the provisions of other contracts
between the parties.
Although one might question the appropriate
ness of the reference to the principles governing
the interpretation of tariffs, as such, since what
was in issue was the nature of the contract of
November 1, 1969, and not the application of its
terms once it was deemed to constitute a tariff, I
do not think that in the result the Board was in
error in refusing to consider the evidence which
the appellants requested it to consider. This evi
dence was apparently to be relied on to show that
what the parties to the contract understood or
intended by "redelivery" was exchange or repay
ment of a loan rather than sale. In my view, this is
not a case of the kind to which Lord Wilberforce
referred in the Prenn case in which reference must
be made to mutually known facts to determine the
meaning of a word in a contract. I do not think
that evidence of the precise reasons why SPC
entered into the contract of November 1, 1969,
and agreed to the terms and conditions it did, even
if such reasons could be shown to have been known
to TransCanada at the time, would throw any
additional light on the legal characterization of
"redelivery" under Article XVII of the contract.
That SPC anticipated the possible need to be able
to obtain supplies of gas from TransCanada during
the years 1974 to 1981 is to be sufficiently inferred
from the recitals of the contract and the provisions
of Article XVII. The legal significance of the term
"redelivery" is not to be determined by evidence of
the need to be able to obtain supplies of gas but by
the other terms and conditions which form its
context in the contract.
The principal contention of the appellant is that
the Board erred in law in characterizing the con-
tract of November 1, 1969 as a contract for the
sale of gas within the meaning of section 51(2) of
the Act. The Board held that the redelivery provi
sions in Article XVII of the contract created an
option to purchase, and that when SPC exercised
this option by the nomination of certain volumes of
gas for redelivery a contract of sale was formed.
The appellants' position is that the contract of
November 1, 1969 is a unitary and indivisible
contract for the delivery and redelivery of gas on
an exchange or loan basis. Alternatively, they
describe the contract as a gas purchase contract
for an entire and indivisible consideration of which
the right to redelivery is an integral part. They
stress the following features of the contract as
supporting this construction: the contract as a
whole is called a "Gas Purchase Contract"; it is
for an overall term of ten years; the terms "redeliv-
ery", "redeliver" and "redelivered" are used
throughout Article XVII; the quantities which
TransCanada is obliged to redeliver at the option
of SPC are approximately those which SPC is
obliged to deliver to TransCanada; the price to be
paid by SPC for such redelivery is the average of
the prices which TransCanada is obliged to pay to
SPC, and there is no provision for redetermination
of such price to reflect the market price at the time
of redelivery. The appellants assert that the prices
stipulated in the contract for delivery by SPC to
TransCanada and redelivery by TransCanada to
SPC are stipulated for accounting purposes only as
a measure or record of the quantities delivered and
do not detract from the essential nature of the
contract as one of exchange or loan.
I agree with the conclusion reached by the
Board on this issue. Whatever one may choose to
call Article XVII of the contract it is inescapable
in my view that it contains an offer to sell, and
that nomination of volumes of gas by SPC consti
tutes an acceptance of that offer. There is there
fore formed by such acceptance an agreement to
sell or a contract for the sale of gas within the
meaning of section 51(2) of the Act. Copies of this
contract were filed with the Board when Trans-
Canada filed the contract of November 1, 1969,
together with the notices of nomination. Both the
delivery and redelivery aspects of the contract
contemplate the transfer of property for a price in
money and thus exclude the concept of loan or
exchange. There is nothing in the record to support
the contention that the prices are stipulated for
accounting purposes only. In so far as the empha
sis on the word "redelivery" is concerned, it is to
be noted that TransCanada is obliged by the terms
of Article XVII to "sell and redeliver".
The appellants contend that the Board erred in
law in holding that section 51(2) of the Act
applied to the contract because the contract does
not in its terms contemplate the interprovincial
transmission of gas. Indeed, the appellants argue
that the redelivery provisions of the contract do
not contemplate transmission at all. Section 51(2)
applies where the gas transmitted by a company
through its pipeline is the property of the com
pany. There must be a transmission of gas, and as
the definitions 6 of "company" and "pipeline" indi
cate, a transmission by means of an interprovincial
pipeline undertaking. Whether the contract for the
sale of gas necessarily involves such transmission is
a question of fact; it is not necessary that it be
expressly provided for in the contract. In fact, the
contract in this case appears to contemplate such
transmission. It is clear, I think, from paragraph
(1)(v) of Article XVII of the contract of Novem-
ber 1, 1969 and paragraph (1) of Article VIII of
the original contract of May 1, 1959, as further
amplified by the letter agreement of October 22,
1962, all of which have been quoted above, that
redelivery is to be at or near Success, Saskatche-
wan, from TransCanada's main pipeline into
SPC's pipeline. TransCanada is a "company" as
defined by the Act. That it operates an interpro-
vincial pipeline undertaking is a matter of such
common knowledge that one might take judicial
notice of it. It is in fact disclosed, for purposes of
the record, by the first recital to the contract of
May 1, 1959, which reads as follows:
6 Sectiofi 2 of the Act, as amended by R.S.C. 1970 (1st
Supp.), c. 27, s. 1(3), provides:
"company" means a person having authority under a Special
Act to construct or operate pipelines;
"pipeline" means a line for the transmission of gas or oil
connecting a province with any other or others of the
provinces, or extending beyond the limits of a province,
and includes all branches, extensions, tanks, reservoirs,
storage facilities, pumps, racks, compressors, loading
facilities, interstation systems of communication by tele
phone, telegraph or radio, and real and personal property
and works connected therewith;
WHEREAS Buyer operates a gas transmission pipe line system
from the Province of Alberta to the City of Toronto in the
Province of Ontario and to the City of Montreal in the Province
of Quebec;
It is a necessary inference that the "main trans
mission pipeline" referred to in Article VIII is part
of TransCanada's interprovincial pipeline under
taking. Certainly, the onus would be on SPC to
show that it is not, and there is no evidence
whatever to support such a conclusion. I therefore
conclude that the contract for the sale of gas by
TransCanada to SPC is one in which the gas
would be transmitted by TransCanada through its
pipeline as its property, within the meaning of
section 51(2) of the Act.
The appellants further contend that to apply
section 51(2), which came into force on June 26,
1970 (S.C. 1969-70, c. 65), to the contract of
November 1, 1969 would be contrary to the pre
sumptions against retrospective operation and
interference with vested rights. Although the terms
and conditions that would govern the sale of gas by
TransCanada to SPC, with the exception of the
quantities to be sold, had been agreed to by the
parties as of November 1, 1969, a contract for the
sale of gas within the meaning of section 51(2) was
not formed until SPC gave notice to TransCanada
on April 30, 1974 and on March 27, 1975 that it
nominated certain quantities of gas for redelivery
during the contract years commencing November
1, 1975 and November 1, 1976. I cannot see,
therefore, how the application of section 51(2) to
the contract for the sale of gas in this case can be
said to be a retrospective one, and I do not find it
necessary to express an opinion as to whether
section 51(2) should be construed so as to apply to
contracts that were formed before it came into
force. Nor do I see that the presumption against
interference with vested rights can have any
application to section 51(2). The vested rights
would be those created by the contract which is
required to be filed with the Board. To the extent
that the requirement of filing would constitute
interference with such rights it is obviously an
interference that is contemplated by the subsec
tion. It is an unavoidable inference from the exist
ence of section 51(2) and section 61 that a con
tract for the sale of gas, which is deemed to be a
tariff and to reflect a toll for transmission in the
amount for which the gas is sold, is subject to
regulation by the Board under the other provisions
of Part IV of the Act. To accept the view that the
Board cannot interfere with tariffs and tolls to the
extent that they have become the subject of prior
contractual agreement would defeat the purposes
of the Act.
In this Court the appellants put forward certain
arguments of a constitutional nature that were
apparently not advanced before the Board. The
Attorney General of Canada intervened to make
submissions with respect to these arguments. The
appellants argued that section 50, which is the
general basis of the Board's jurisdiction under Part
IV of the Act, is so broad in its terms as to purport
to confer jurisdiction to regulate traffic, tariffs and
tolls in respect of intraprovincial undertakings or
transactions and is thus ultra vires the Parliament
of Canada. This contention is without merit. It is
obvious from the terms of section 50, which do not
make specific reference to the kind of enterprise or
activity in respect of which the Board is to have
power to make orders relating to traffic, tolls or
tariffs, that its scope must be determined with
reference to other provisions of the Act. The defi
nitions of "company" and "pipeline", to which
reference has been made, indicate that the purpose
or object of the Act is the regulation of interpro-
vincial pipeline undertakings. Section 50 must
therefore be construed as intended to apply to such
undertakings. There is no basis in the context of
the Act as a whole for not applying the presump
tion that, in enacting section 50, Parliament
intended to remain within its legislative
jurisdiction.
The appellants also argued that it would give
section 51(2) an ultra vires application to apply it
to a transaction of sale which takes place wholly
within a province. It is not clear from the record
that the transaction or operation involved in giving
effect to the provisions of Article XVII of the
contract is to be carried out wholly within the
province of Saskatchewan. The onus of proving
this to be a fact, in a challenge to jurisdiction, rests
with the appellants. But assuming, for the pur
poses of argument, that it is a wholly intraprovin-
cial transaction or operation—that is, that the
transmission required to give effect to the terms of
Article XVII of the contract is one that could be
considered to take place wholly within the prov-
ince—it would still be one that falls within federal
legislative jurisdiction on the necessary assump
tion, indicated above, that it would be transmission
by means of an interprovincial pipeline. Such a
pipeline falls, of course, within exclusive federal
legislative jurisdiction by virtue of sections
92(10)(a) and 91(29) of The British North
America Act. Campbell-Bennett Ltd. v. Comstock
Midwestern Ltd. [1954] S.C.R. 207. Any trans
mission through it, even such as might conceivably
be considered to take place wholly within a prov
ince, would fall under such jurisdiction as a part of
an indivisible interprovincial undertaking. Attor
ney General for Ontario v. Winner [1954] A.C.
541; The Queen v. Board of Transport Commis
sioners [1968] S.C.R. 118. A contract of sale by a
pipeline company, involving transmission through
its interprovincial pipeline, is a matter that falls
within federal jurisdiction with respect to such an
undertaking. Parliament must have jurisdiction to
regulate the terms and conditions upon which such
transmission is made, whether the contract in
which they are reflected takes the form of a con
tract of service or a contract of sale. The fact that
a pipeline company owns and sells the product
which it transmits does not make it any less a
pipeline company subject to regulation as to the
consideration which it charges for transmission.
For the foregoing reasons I am of the opinion
that the Board did not act beyond its jurisdiction
or otherwise err in law in coming to the decision
that it did, and I would accordingly dismiss the
appeal with costs.
* * *
URIE J.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.